Gree Electric Appliances, the air conditioner giant chaired by one of China’s best-known female business leaders, has been approved to go completely private. The company said in an announcement this week that the State-owned Assets Supervision and Administration Commission has agreed in principle for the city government to transfer most of its stake in the company through a public tender.
Gree Electric is controlled by the Zhuhai city government, which has an 18.22% stake via Gree Group. It will sell down this stake to just 3%, at RMB44.17 per share, for a total consideration of RMB39.86 billion.
The state asset supervision authority has clarified that bidders must be qualified. Moreover, they must pledge to “maintain the independence of the listed company” and “avoid competition with listed peers”. Most importantly, the transferee must pledge not to voluntarily relocate the headquarters and registration of Gree Electric Appliances beyond Zhuhai.
At least 25 companies have expressed interest in the stake, including Singapore’s Temasek Holdings, Chinese private equity firm Hopu Investment Management, and tech giant Baidu.
It had been anticipated that Dong Mingzhu, thee chairperson who currently holds a 0.74% stake, would raise private-equity backing for the purchase. This has not materialized, yet. Hopu Investments is seen as the leading candidate by many analysts.
Gree Electric’s second largest shareholder, at 11.64%, is Hong Kong Exchanges and Clearing Ltd., the parent company of the Hong Kong Stock Exchange.
The Zhuhai government’s plan to divest its holdings in Gree Electric comes as the company has in recent years seen its share of the air conditioner market fall as it pushed into diversified areas such as mobile phones, automobiles and microchip production. But Gree Electric’s diversification efforts have for the most part not borne fruit. Air conditioner sales still account for about 80% of its total annual revenue.