Hisense Bets Large on Automobile Market With $200 Million Bid for Air-Conditioning Maker

Hisense Home Appliances Group Co. Ltd. (000921.SZ) is committed to growing auto sales in China and is ready to spend $ 200.7 million on a controlling stake in Sanden Holdings Corp., a Japanese manufacturer of automotive air conditioning systems.

The Foshan-based home appliance company plans to use cash to purchase 83.6 million shares of Sanden at 256 yen ($ 2.40) each in a private placement.

The successful purchase would make Hisense the controlling shareholder of Sanden with 75% of the voting rights, according to a statement to the Shenzhen Stock Exchange on Monday.

The sale has to be approved by Sands creditors, who will meet in late April to discuss the deal.

In the market’s reaction to the announcement, Sanden’s share price closed 17.28% on Tuesday, while Hisense’s share rose by its 10% daily limit an hour after the Shenzhen market opened. The rise in the price of the Chinese company triggered a suspension of stock trading.

The number of new shares to be issued as part of the private placement is almost three times as high as the current number of Sanden shares traded on the market.

Hisense knocked out 24 other companies to be the winning bidder, said Sanden, who was mired in liquidity issues due to pandemic pressures and hoped the deal could consolidate his business.

Sanden was founded in 1943 and specializes in the manufacture of air conditioning compressors for vehicles and the provision of air conditioning systems in cars. Between April and December, the company posted a loss of 17.2 billion yen ($ 160.8 million) as vehicle sales by its main customer, French automaker PSA Ltd. and General Motors Co., declined 11.5% and 27.8%, respectively, in 2020.

The deal will help grow Hisense’s business and improve Sanden’s profitability by leveraging the Chinese company’s global supply chain system and bargaining power in sourcing, the statement said.

Vehicle sales in China rose 29.5% in January as the market continued to recover from weakness exacerbated by the Covid-19 pandemic in the first half of 2020.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com).

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