Whirlpool Buys 51 pct Stake in China Appliance Maker

Whirlpool Buys 51 pct Stake in China Appliance Maker

Whirlpool will buy a majority stake in China's Hefei Rongshida Sanyo Electric Co Ltd for $552 million as the world's largest maker of home appliances seeks to expand its sales in Asia.

Last year, the company, which competes with larger Chinese companies such as Haier Electronics Group Co Ltd and GD Midea Holding, reported a net profit of $48 million on sales of $636 million.

The deal represents the first big purchase of a Chinese company by a blue-chip U.S. buyer since Caterpillar bought ERA Mining, a maker of underground mining equipment, in 2012. Caterpillar later discovered an ERA subsidiary had engaged in accounting misconduct that inflated ERA Mining's value.

Although Caterpillar was able to significantly reduce its purchase price, the Peoria, Illinois-based company was forced to take a $580 million charge as a result of the deal, and some analysts feared the fiasco would put a chill on foreign purchases of Chinese companies.

Whirlpool's purchase of Hefei Sanyo will help the U.S. company boost its business in Asia, which contributed just 5 percent of its total sales of $4.7 billion the second quarter.

China unit would initially buy Sanyo's 29.51 percent stake in the company through a share purchase deal. It will then acquire the remaining shares through a private placement.

Whirlpool China will have to pay a break-up fee of $20 million if it fails to close the transaction.