Chinese manufacturer Haier is expected to take a cornerstone stake in debt-ridden Fisher & Paykel Appliances with an offer too good to refuse, investors say.
Trading in F&P shares was halted yesterday morning as the company was finalising plans to raise more capital and strengthen its financial position before Friday's deadline for an $80 million bridging loan facility agreed by its banking syndicate last month.
F&P would give Haier access to the lucrative European and North American markets with the New Zealand brand sitting alongside Haier's budget lines.
Some investors suggested Haier could take a 20 per cent stake with possible board representation.
F&P was granted a sharetrading halt after reporting capital management initiatives were incomplete and the company was not yet in a position to announce them. But with the 48-hour halt ending tomorrow, the company is expected to reveal how it has been faring in the global recession.
"Given that the trading halt came as early as it could after reports over the weekend that Haier was being lined up as a cornerstone investor, I would expect Haier to be involved," market commentator Arthur Lim said.
"One doesn't have to look further than Australia to see how the Chinese are taking the opportunity to buy up strategic companies. Now an opportunity presents itself to buy F&P at a knock-down price.
"F&P operates at the middle and premium end of the market, so if you are looking to upgrade your brand there isn't a much better choice."
Analysts also talked up the strategic benefits for any likely investor. F&P's competitive advantage lies in research and development the company introduced the tumble dryer and Dishdrawer dishwasher.
But the list of likely suitors is short given appliance manufacturers around the world are battling the same headwinds. Private equity players, too, are busy managing their own balance sheets. Sweden's Electrolux reported a fourth-quarter US$57m (NZ$92m) loss and ruled out paying a dividend this year, while US-based Whirlpool with which F&P has distribution and technology share agreements reported a 76 per cent drop in net income at US$44m for the December quarter because of higher restructuring charges and falling sales.
F&P also has a distribution arrangement with Turkey's largest appliance maker, Arcelik, whose fourth-quarter net loss ballooned more than 500 per cent to US$2.4m as export markets shrank and earnings plunged.
Mr Lim said Haier would probably follow the trend set by Chinese companies buying up strategic stakes in Australian mining companies by offering a significantly higher than market price.
"That way there's no discussion, no controversy. In effect, other companies would have to put up or shut up. That would make life pretty interesting for those who have been waiting for heavily discounted rights issue, and what does someone like Whirlpool do?"
F&P's debt has swollen to $570m to finance a shift of manufacturing to lower cost countries and because a lower kiwi dollar increased the size of foreign debt.
Speculation is rife in the investment community that the troubled white-goods maker could be about to come clean with details of a $200m rights issue. Others, meanwhile, say tomorrow's announcement could confirm the sale of F&P's East Tamaki headquarters, which it plans to lease back.
"There is a lot of noise that they have sold the building site in Mt Wellington, so that will help alleviate the problem and enable them to pay some debt with that, but it is only a stop-gap," ING senior investment analyst Craig Brown said.
"It would be in the order of $60m to $80m depending on how they structure it for the dirt, so depending on how comfortable they view the business you could easily see a couple of hundred million dollars potentially from an equity raising."
F&P shares last traded at 66c.
FPA Price at posting:
36.5¢ Sentiment: None Disclosure: Held
