Whirlpool buys large stake in Hefei Sanyo

US-based multinational home appliance maker Whirlpool Corporation's purchase of a majority stake in Chinese household electric device producer Hefei Rongshida Sanyo Electric Co is likely to help the US company to continue tapping into the China market, analysts said on Wednesday.

Whirlpool announced Tuesday that it will purchase a 51 percent stake in Hefei Sanyo for 3.4 billion yuan ($552 million). but the deal is subject to approval from Chinese regulators and the Hefei firm's shareholders.

The transaction is expected to close by the end of 2014, and Whirlpool expects that this transaction will be accretive in the first full year of integration, Whirlpool said in a statement e-mailed to the Global Times Wednesday.

Hefei Sanyo, founded in 1994 and employing around 10,000 people, reported revenue of 4.02 billion yuan and net profit of 348 million in 2012.

Liu Buchen, a home appliance expert with consultancy Jiachunqiu Media Institute, said Wednesday that Whirlpool has to grab a share of the China market for the company to remain competitive.

"China is the world's largest home appliance market and manufacturing base. Therefore, multinationals have to succeed in this market in order to win overall," Liu said.

The company used to own a ­washing machine plant in Shanghai, which was closed in 2009. And in 2008, the Whirlpool and home appliance maker, Hisense-Kelon Electrical Holdings Co created a 900 million-yuan joint venture researching washing machines and refrigerators.

Hefei Sanyo owns several brands, namely the low-end Rongshida and Royal Star lines, the mid-price Sanyo and higher-end Diqua. The Sino-Japanese joint venture has been struggling in recent years as Japanese Sanyo Electric Co was a major shareholder.

"Many Chinese consumers are reluctant to buy products made by a Japanese company due to the two countries' dispute over the Diaoyu Islands," Liu said.

However, since Whirlpool has only a small market share in China, this deal will not dramatically lift its presence in the country, said Luo Qingqi, director of Pa Le Consulting Corporation.

"Whirlpool still has a long way to go if it wants to catch up with competitors such as Haier Electronics Group and Midea Group," Luo said.

Liu agreed with Luo, but noted that the transaction would at least give Whirlpool the three production bases that Hefei Sanyo owns, which could serve as a pivot point for the US company to further expand in China.

Whirlpool said its China unit would initially buy Sanyo's 29.51 percent stake in Hefei Sanyo through a share purchase deal, and it will then acquire the remaining shares through a private placement, Reuters reported Tuesday.