F&P Appliances shares jump on Haier takeover move

UPDATE: Haier's takeover offer for Fisher & Paykel Appliances is expected this week.

The listed company announced to the stock exchange this morning the Chinese manufacturer, a 20% shareholder, has indicated it may offer to buy the whole company and has approached three other major investors.

F&P Appliances shares [NZX:FPA] jumped 40% in early trading this morning, to a four-year high of $1.30.

By 1pm they had eased to 95 cents - still up by more than 25% - on trading of 2.1 million shares, worth $2 million.

The rise has increased F&P Appliances' market value from $543 million to $688 million.

Two of F&P's biggest shareholders, Accident Compensation Corp, with 7.5%, and AMP Capital Investors, with 5.2%, refused to say if they would sell their shares to Haier - or even if they discussed the possibility with representatives from the Chinese company last weekend.

F&P chairman Dr Keith Turner told NBR ONLINE an offer is expected within days.

"The fact that they approached major shareholders over the weekend is a sign that they have some intention. That's why we have released that information to the market.

"I would anticipate it would be a few days rather than weeks."

He says Haier's directors are in the country and no further due diligence is being done on top of the information released to the stock exchange this morning.

Haier's expression of interest should be no surprise, he says.

"Any company that holds 20% and is in the same sector as the company they own a part of, there's always an interest in what more they can do.

"We've been in discussion with them for the last few weeks. The sector does appear, globally, to be in a recovery phase so, again, at a sector level it's not a particular surprise."

Once an offer is received, F&P has 14 days to make a target company statement to shareholders.

It is advising shareholders against selling until that statement has been made.

The two companies have had a growing, arms-length commercial partnership since 2009, when Haier bought its 20% stake.

F&P now distributes Haier appliances in New Zealand and Australia, while Haier buys Fisher & Paykel's production machinery and technology.

"The two companies have worked well together in the last three years," Dr Turner says.

"They're a cornerstone customer in components and technology – and a shareholder to boot."

F&P recently announced it is reviewing manufacturing operations, including its Auckland factory.

In mid-2006 F&P shares were worth almost $3, but they dropped steadily to below 50c in 2009. The value has not hit $1 since late 2008.

BUSINESSDESK: Fisher & Paykel Appliances says 20% shareholder Haier of China has indicated it may offer to buy the whole company and has approached three other major investors.

No price was given for the possible takeover, which Auckland-based F&P Appliance says would represent a premium to the current share price. It was described as a potential cash offer subject to conditions.

Shares of the manufacturer of ovens, fridges and dishwashers have soared 108% this year and last traded at 75 cents, valuing the company at $543 million.

Haier has asked to undertake limited commercial and financial due diligence and the target company subsequently provided an extract from its five-year strategic plan.

That was released today after Haier advised F&P Appliances that it would approach three of the largest shareholders over the weekend regarding the possible takeover offer for the company.

Among the F&P's biggest shareholders is Orbis Investment Management with 17%, Accident Compensation Corp with 7.5% and AMP Capital Investors with 5.2%, which would bring Haier within reach of a 50% controlling stake.

The strategic review gives a forecast for 2013 capital expenditure of about $42 million while net debt will be "well below the $65 million as at March 31 this year, excluding the finance business".

The Chinese company injected much-needed equity in F&P Appliances as part of a $200 million rights issue in 2009, when the New Zealand company was forced to raise funds to repay bank debt.

Since then, the local company has taken over distribution of Haier products in Australia.

The company reiterated its forecasts given in August for full-year operating earnings before interest and tax would be $70 million to $78 million, made up of ebit from Appliances' of between $35 million and $40 million and earnings from Finance of $35 million and $38 million.

The company's strategic review shows a concerted push to monetise licensing of its technology including its direct drive motors and compressors.

It gave a 2017 target for earnings in North America rising to $US20 million on an ebit basis from about $US1 million in 2012.