Wall Street investment bank Goldman Sachs has agreed to buy a 10.7 per cent stake in Chinese appliance maker Midea for 717 million yuan ($91mn).
SHANGHAI: Wall Street investment bank Goldman Sachs has agreed to buy a 10.7 per cent stake in Chinese appliance maker Midea for 717 million yuan ($91mn).
Midea will issue 75.6 million new shares at 9.48 yuan each in a private placement to a unit of Goldman. The price represents a substantial 26 per cent discount to Midea's last share price of 12.79 yuan on the Shenzhen Stock Exchange.
Goldman is using a new investment route for the deal. This year, Beijing began letting foreign investors buy "strategic stakes" of above 10 per cent in listed firms, bypassing the tight quota system for foreign investment in China's domestic stock markets.
Earlier this month, Goldman signed a similar deal to buy a $113 million stake in China's biggest auto glass maker, Fuyao Glass
Midea, whose Shenzhen-listed shares have surged nearly 40 per cent this month, said its deal with Goldman was subject to approval by Chinese authorities including the Ministry of Commerce.
Authorities have been dragging their feet on approving some major foreign investments in Chinese firms, fearing China might be selling its assets too cheaply. But deals that have been stalled are largely in strategic areas of the economy such as heavy machinery, not in consumer goods.
Midea, a private company which is one of China's biggest makers of appliances including refrigerators and electric fans, made a net profit of 382 million yuan in 2005, up from 327 million yuan in the previous year.
As part of the strategic investment deal, Goldman agreed not to sell its shares in Midea for three years after the purchase.
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