KKR & Co. (KKR:US) agreed to buy a 10 percent stake in appliance maker Qingdao Haier Co. for 3.38 billion yuan ($552 million), the New York-based private-equity firm’s biggest investment in China.
The Shanghai-listed unit of China’s largest appliance maker is selling 299.5 million shares at 11.29 yuan each to KKR in a private placement, the company said in a statement posted to the Shanghai Stock Exchange yesterday. That’s a 15 percent discount to the price on Sept. 12, the last day before Qingdao Haier suspended share trading pending an announcement.
KKR is making the investment as Chinese Premier Li Keqiang drives an urbanization campaign that may see hundreds of millions of rural workers and their families become city residents, boosting consumption demand. The private equity firm is stepping up deal-making in Asia after raising $6 billion earlier this year for the industry’s largest investment pool in the region, according to researcher Preqin Ltd.
China’s consumer industry “can expect to see more interest from foreign firms looking to take advantage of the sector as demand from China’s burgeoning middle-class increases,” Mitul Patel, manager for Asia research at Preqin, said via e-mail today.
Operating income at Qingdao Haier has increased by more than 25 percent annually since 2008, according to data compiled by Bloomberg. It is the Shanghai-listed arm of Haier Group, China’s largest appliance maker, which acquired New Zealand’s Fisher & Paykel Appliances Holdings Ltd. last year to expand overseas and add manufacturing facilities around the world.
“The theme of consumer migration from low-income to middle class is certainly something we’re seeing” in emerging markets such as China and Brazil, Alex Navab, KKR’s co-head of private equity in the Americas, told a conference audience on Sept. 26. “Those industries that benefit from that migration are certainly industries that we look at,” Navab said, citing the consumer, health-care and education industries.
The private equity firm run by Henry Kravis and George Roberts agreed on Sept. 27 to buy Panasonic Corp. (6752)’s health care unit for about 165 billion yen ($1.7 billion).
Success Dairy, a company part-owned by KKR, agreed on Sept. 24 to build dairy farms with China Modern Dairy Holdings Ltd. (1117), the nation’s largest raw-milk producer.
In January, KKR more than doubled its stake in a unit of Vietnamese food-sauce maker Masan Group Corp. to $359 million, marking its biggest investment in Southeast Asia. That deal was announced three months after KKR opened its seventh office in Asia with a Singapore team. Its other offices in the region are in Beijing, Hong Kong, Tokyo, Seoul, Mumbai and Sydney.
KKR has invested more than $5.5 billion in Asia since it opened its first office on the continent in 2005. The firm has more than 100 deal makers across Asia, it said in July.
The transaction with Qingdao Haier requires approval from China’s Ministry of Commerce and the China Securities Regulatory Commission, the company said in a statement. The Chinese company’s shares will resume trading Oct. 8, it said in a separate statement. China’s stock market is closed for a week for a holiday.
China must spend at least 41.6 trillion yuan over two decades on integrating rural workers living in cities and towns to realize the benefits of urbanization, according to a United Nations report in August, which estimated the urban population would rise to 976 million in 2030 from 666 million in 2010.
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