What's behind the twists and turns of Gree's acquisition of Panasonic's microwave ovens?

A clarification announcement has allowed the public to catch a glimpse of another capital operation attempt by Guangdong Galanz Group (hereinafter referred to as "Galanz"), the "Microwave King".

On the evening of June 15th, Yunsai Zhilian (600602.SH) issued a clarification announcement stating that Galanz's wholly-owned subsidiary Guangdong Chuangyang Investment Management Co., Ltd. (hereinafter referred to as "Chuangyang Investment") and Foshan Mingqinggewu Industrial Investment Co., Ltd. (hereinafter referred to as "Mingqinggewu") were reported to the securities regulatory department by Shanghai Yidian (Group) Co., Ltd. (hereinafter referred to as "Yidian Group") and Shanghai United Property Rights Exchange (hereinafter referred to as "Property Exchange") after their qualifications for acquiring 40% equity of Panasonic Microwave Oven were not confirmed.

Yunsai Zhilian denied the allegations and made a clarification.

According to a source related to Galanz, Galanz attempted to acquire 40% of the shares of Shanghai Panasonic Microwave Oven Co., Ltd. (hereinafter referred to as "Panasonic Microwave Oven") held by Yangtze River Investment Holding (Shanghai) Co., Ltd. (hereinafter referred to as "Yangtze River Company"), but the transfer qualification was not confirmed by the Property Exchange and Yidian Group.

Yunsai Zhilian stated in the clarification announcement that the same industry competition restriction clause of Yangtze River Company was stipulated in the "Joint Venture Contract of Shanghai Panasonic Microwave Oven Co., Ltd." signed between Yangtze River Company and one of the transferees, Panasonic Electric Works (China) Co., Ltd. (hereinafter referred to as "Panasonic China"). Since Galanz, the controlling shareholder of Chuangyang Investment, is a microwave oven manufacturer and competes with Panasonic Microwave Oven, it does not meet the conditions.

However, a source related to Galanz stated that an objection letter has been submitted to the Property Exchange. The "Joint Venture Contract" was temporarily modified in March of this year and is not a public clause, and should not be a reason for regulating the transferee's qualifications.

On June 16th, the author repeatedly called Yunsai Zhilian's securities affairs department and sent a letter of inquiry to TradeWind01, but did not receive a response as of the time of publication.

On the same day, Yunsai Zhilian's stock price opened high and went up, hitting the limit, and closed at 15.69 yuan/share. It is worth mentioning that Yunsai Zhilian has received eight consecutive days of rising prices, with an increase of 54.89%.

Each has its own words

At present, the dispute between Galanz and Yunsai Zhilian has become a "Rashomon", and both sides have their own words.

But the core contradiction is already clear: whether Chuangyang Investment, controlled by Galanz, and Galanz's affiliated company Foshan Mingqinggewu Industrial Investment Co., Ltd. (hereinafter referred to as "Mingqing Company") have the qualifications to acquire Panasonic Microwave Oven.

On March 29th of this year, Yunsai Zhilian announced that due to the objective situation that the joint venture period of Panasonic Microwave Oven will expire in 2024, and the company will further focus on its main business, it plans to publicly list and transfer the 40% equity of Panasonic Microwave Oven held by Yangtze River Company through the Property Exchange.

The announcement shows that as of December 31, 2022, the total assets of Panasonic Microwave Oven were 710 million yuan, total liabilities were 270 million yuan, and net assets were 440 million yuan. In 2022, Panasonic Microwave Oven achieved revenue of 1.67 billion yuan and net profit of 24.923 million yuan. After evaluation, the 40% equity of Panasonic microwave corresponds to a shareholder equity value of approximately RMB 194 million.

According to TradeWind01, who obtained information from Gree related personnel, in addition to Chuangyang Investment and Mingqing Company, Panasonic China has also submitted intention to acquire materials to the exchange.

However, on May 29th, Chuangyang Investment received a "Notice of Confirmation of Acquisition Qualification Results" from the exchange, informing them that the transferor Yangtze River Company and its approved unit Yidian Group did not confirm their acquisition qualifications.

The reason is that the Yangtze River Company and Panasonic China signed a "Joint Venture Contract" which stipulates the same industry competition restriction clause for the Yangtze River Company. Since the affiliated parties and actual controllers of Chuangyang Investment are engaged in similar or similar business and products as the joint venture company, they do not meet the same industry competition conditions.

However, Chuangyang Investment related personnel told TradeWind01 that the same industry competition restriction clause in the above-mentioned "Joint Venture Contract" is not a public regulation and should not be a reason for regulating the qualifications of the transferee.

The above-mentioned person said that the "Joint Venture Contract" was modified before the listing transfer in March this year, and two comparison charts of relevant regulations before and after the modification were provided to TradeWind01.

As a result, the core point of disagreement between Chuangyang Investment and Yangtze River Company has become whether the undisclosed "Joint Venture Contract" competition clause can become the evaluation standard for the qualifications of the intended transferee.

The head of the Chuangyang Investment Financial Center tends to think that "the transaction conditions have changed temporarily." He told TradeWind01 that the "Enterprise State-owned Property Transfer Registration and Acquisition Intention Operation Rules of Shanghai United Property Rights Trading Co., Ltd." (hereinafter referred to as the "Operation Rules") clearly states that "the qualification conditions of the transferee that have not been released cannot be used as the basis for confirming the qualification of the intended transferee."

Yunsi Zhilian emphasized in the clarification announcement that the restriction requirement of same industry competition has been stipulated in the "Joint Venture Contract" when Panasonic microwave was established in August 1994. The modification of the "Joint Venture Contract" this time is not an additional same industry competition restriction condition for the transferee shareholders.

As for which of the "Joint Venture Contract" and the "Operation Rules" has a higher legal effect, Zhang Rencang, a senior partner of Beijing Yingke Law Firm, told TradeWind01 that the "Joint Venture Contract" belongs to a contract, and the parties to the contract are Yangtze River Company and Panasonic China, and the effectiveness of the contract only binds the parties to the contract.

"The 'Operation Rules' of the exchange belong to government regulations and have been registered. The objects bound by it are more than the 'Joint Venture Contract', and all parties involved in the exchange of the exchange need to comply with the 'Operation Rules'. Therefore, the effectiveness of the 'Operation Rules' is higher than that of the 'Joint Venture Contract'." The above-mentioned person added.

Frequent Capital Operations

From the statements of relevant personnel from Galanz and Chuangyang Investment mentioned above, we can feel Galanz's urgent attitude to acquire 40% equity of Panasonic Microwave.

In recent years, Galanz's capital operations have not been lacking in bold moves.

In May 2021, Galanz acquired approximately 51.1% of WHIRLPOOL's shares for CNY 2.048 billion. To solve the problem of industry competition, WHIRLPOOL's president, Liang Huiqiang, publicly stated that WHIRLPOOL will focus on white goods such as refrigerators and washing machines, while Galanz and its sub-brands, Yichu, will focus on the life appliances track.

As of the first quarter of this year, Galanz's shareholding ratio reached 57.34%, and WHIRLPOOL's market value was around CNY 5.5 billion.

Galanz is known as the "Microwave Oven Leader", but according to data from Aowei Cloud Network reviewed by TradeWind01, Galanz's brand's market share of desktop single-function microwave ovens in May was about 37.56%, lower than Midea Group's 57.03%, but far higher than Panasonic's third place of 3.85%.

Liu Buchen, a senior observer in the home appliance industry, analyzed to TradeWind01 that microwave ovens are a competition between Midea Group and Galanz, and the sales difference is not significant, and they are relatively close. Moreover, microwave ovens have long entered the era of stock market, and even the domestic microwave oven market is gradually shrinking. The two giants' microwave ovens mainly rely on exports to support sales.

"If Galanz can take control of Panasonic's microwave oven, its advantages in microwave ovens will obviously surpass Midea Group. I think this is the reason," the above-mentioned person added.

However, based on the information disclosed by both parties at present, it is still unclear whether Galanz can join the bidding for 40% equity of Panasonic Microwave.