(Yicai Global) May 17 -- China's Gree Electric Appliances Inc., the world's largest producer of air conditioners, aims to spend CNY5.2 billion (USD823 million) on a 20 percent stake in Changyuan Group Ltd. [SHA:600525], one of the country's biggest suppliers of components for lithium batteries, typically used in new energy vehicles.
Changyuan Group [SHA:600525] has suspended trading due to Gree's proposal to buy 265 million shares at a price of CNY19.8 per share, 14 percent higher than its last closing share price, the Zhuhai-based firm said in a statement.
The firm has posted solid net profit growth for three consecutive years, cashing on the increasing popularity of NEVs in China, which accounted for just under half of all sales globally last year. Net earnings were CNY483 million, CNY640 million and CNY1.1 billion in 2015, 2016 and 2017, respectively, up 32 percent, 32 percent and 77 percent on an annual basis.
Shanghai Stock Exchange has responded to the offer asking for clarification from Gree on the reasons behind its offer for Changyuan shares, as well as the source of its investment funds and whether the move involves horizontal competition.
The investment is thought to be part of Gree's aim to move into the NEV market, insiders say. The firm's high-profile Chairwoman Dong Mingzhu has long held a desire to build cars and previously acquired shares in lithium materials supplier Yinlong Energy Co. in her own name following Gree's difficulties in gaining approvals for a deal back in the second half of 2016.
Dong became second-largest shareholder in Yinlong Energy with a 17.5 percent stake in November 2016. However, negative news about the company including a CNY1.2 billion default on payments to suppliers have brought increased regulatory scrutiny.
Gree responded saying the investment is unrelated to Yinlong Energy, while Changyuan Chairman Xu Xiaowen told the media that the firm would welcome Gree's involvement, adding that there is no cooperation between Changyuan Group and Zhuhai Yinlong, and Dong has not taken part in Changyuan negotiations.
Editor: William Clegg