(Yicai Global) March 26 -- Chinese home appliance giant Midea Group will spend CNY740 million (USD104 million) to buy control of Beijing-based industrial inverter supplier Hiconics Eco-Energy Technology, thus speeding its push into industrial automation, Midea said in a statement today that drove Hiconics' shares to open at the daily limit up.
Foshan, Guangdong province-based Midea's wholly-owned GD Midea Heating & Ventilating Equipment unit penned an equity transfer agreement with Hiconics' controller Shanghai Shangfeng Group and individual shareholder Liu Jincheng to acquire 18.73 percent of Hiconics' stake, and gain an added 5 percent in voting rights from Ye Jinwu, Hiconics' actual controller and chairman, per the statement.
Midea will thereby enjoy 23.73 percent of Hiconics' voting rights to become its largest shareholder, while the original controller Shanghai Shangfeng Group will cut its holding from 21.47 percent to under 4 percent.
Hiconics' stock [SHE:300048] now stands at CNY3.72 (52 US cents), giving it an about CNY4.1 billion market cap. Midea's shares [SHE:000333] fell 099 percent to close at CNY49 today, even as the overall Shanghai Composite Index shed only about 0.4 percent.
The buy-in will also help Midea, which is China's largest appliance maker, expand its business-to-business line and hasten its research and development of large central air conditioners with frequency conversion to compete with traditional fixed-frequency products, the firm added.
Formed in 2003, Hiconics' core business is production of industrial inverters and servo systems. The company achieved CNY1.3 billion revenue last year, up 8 percent on the year, and its net profit was CNY23.6 million, per its latest performance report. It posted a CNY2.4 billion net loss in 2018.
A servo system is an electro mechanical or hydraulic mechanism that follows a desired position, speed or time in a sealed loop. It consists of a motor, a feedback sensor and and logic, generally electronic but also mechanical, that sets the motive apparatus to a desired setting.
Industrial inverters are solid state motor control systems used primarily in manufacturing. Their variable speed drives control the speed of electric motors.
Editors: Dou Shicong, Ben Armour