Whirlpool Corp.: Structuring the Deal to Acquire Hefei Rongshida Electric Company
HBS Case Study No. 216-019
Posted: 11 Nov 2015
Date Written: October 15, 2015
Ian Lee, Whirlpool's VP for North Asia, had been negotiating a possible acquisition with Jackie Jin, the chairman of a leading Chinese appliance manufacturer named Hefei Rongshida Sanyo Electric Company (Hefei Sanyo), for almost six months when suddenly Hefei Sanyo's stock price jumped 25% in the first two weeks of May 2013. The sudden price increase not only increased the likely acquisition price for an ownership stake in Hefei Sanyo, but also meant that Whirlpool had lost the luxury of both time and secrecy. Lee had to quickly decide how to structure a deal that enabled Whirlpool to acquire controlling ownership position (>50%) in the state-owned enterprise (SOE)-something that had not been done before; how much to pay for the stake; and how to ensure commercial, regulatory, and political approval for the deal.
This case has three objectives: 1) it provides an introduction to the market for corporate control in China and the process by which foreign firms acquire Chinese targets, specifically state owned enterprises (SOEs); 2) it highlights the challenges for foreign firms of executing acquisitions in China including maintaining secrecy, conducting due diligence, obtaining political and regulatory approval, and valuing Chinese firms; and 3) it describes the domestic regulatory agencies responsible for overseeing mergers and acquisitions of Chinese firms.
Keywords: China, Mergers & Acquisitions; State-owned enterprises; Strategy; Brands, Finance, Valuation, White Goods
JEL Classification: G34, G32, G38
Suggested Citation: Suggested Citation