(Yicai Global) June 16 -- The sale of Inesa Intelligent Tech unit’s equity in a microwave oven joint venture to its overseas investor Panasonic Corporation of China for the lowest bid of CNY200 million (USD28 million) is in accordance with the law, the Chinese parent firm said after home appliance giant Galanz Group contested the takeover, saying its offer to buy the stake was unjustifiably rejected.

Shanghai Yangtze River Investment Development put its 40 percent stake in Panasonic Appliances Microwave Oven Shanghai up for tender on the Shanghai United Assets and Equity Exchange in April at a starting price of CNY200 million (USD28 million), which it said was the appraised value.

Three companies entered the bidding, namely Panasonic China and two firms connected to Foshan, southern Guangdong province-based Galanz.

But Yangtze River Investment rejected Galanz’s application on the grounds that it is engaged in a business similar to that of the JV and does not meet the condition of restricting intra-industry competition.

The two Galanz-related entities, Guangdong Chuangyang Investment Management and Foshan Mingqing Gewu Industrial Investment, reported the seller to the Shanghai bourse on June 13, claiming that by rejecting their bids without good reason, Osaka-based Panasonic was able to purchase the remaining equity in the JV, which earned CNY2 billion (USD281.4 million) in revenue last year, at a low price without any competition.

There is a clause in Panasonic Microwave Oven's contract that has been there since 1994 when the JV was established restricting horizontal competition and was not recently added, Shanghai-based Inesa said.

The clause stipulates that the JV's Chinese shareholder and its affiliates cannot make or sell the same products as the JV, such as microwave ovens, for a 30-year period and it will not expire until Aug. 21 next year, Inesa said. Galanz is subject to the clause as it makes microwave ovens, it added.

Galanz is China’s second-largest microwave oven maker after Midea Group, with the two companies together accounting for more than 80 percent of the market. Galanz’s attempt to acquire a stake in Panasonic Microwave Oven is primarily aimed at strengthening its position in the export market, industry insiders noted.

Editor: Kim Taylor