LEADING CHINESE WHITE goods maker Midea (美的）has agreed to buy 80.1% of Toshiba's home appliances division (东芝家电）for Yen53.7 billion (US$473 million), officially designated within Toshiba Corporation as the Toshiba Lifestyle Products & Services Corporation (TLSC). This further strengthens a relationship between the two companies that dates back over two decades during which they have cooperated closely on development of compressors, frequency convertors and small household electrical appliances.
The definitive agreement to transfer the bulk of TLSC to Midea was signed by both parties on 30 March and provides for:
- Midea will acquire an 80.1% stake in TLSC”) with Toshiba retaining a 19.9% shareholding.
- The TLSC business will continue to develop, manufacture and market white goods, such as refrigerators, washing machines, vacuum cleaners and other small domestic appliances under the Toshiba brand name and the current company name.
- All employees of TLSC group engaged in the business will continue to work with TLSC group.
- Midea will be licensed to use the Toshiba brand worldwide in relation to the business for 40 years.
- Midea will receive more than 5,000 IP (intellectual property) assets and a license to use other home appliance-related IP retained by Toshiba.
Midea, founded in 1968, had total sales of US$23 billion in its fiscal year 2014 and a work force of 108,000 worldwide. The Midea parent company listed on the Shenzhen stock exchange in 1993 and has two subsidiaries - Xiaotian'e (小天鹅，Cygnet）and Weiling (威灵，Prestige）Holdings - listed on the Shenzhen and Hong Kong stock exchanges respectively.
On its website, Midea describes itself as 'a leading consumer appliances and HVAC (heating, ventilation and air-conditioning) systems manufacturer'. The company has a clearly articulated, three-phase strategy to go global - what the Chinese call 走出去 （zouchuqu, literally 'going out' or 'walking out') - it's so-called 333 strategy:
- 3 years to make great products, consolidate its foundations and system quality, and to further improve the quality of its operations.
- 3 years to progress from being one of China's top 3 home appliance companies to becoming the undisputed market leader.
- 3 years to establish its status as a significant player in the global home appliance market and to realise a worldwide operations network.
Midea says it is currently in the second phase of its '333 strategy' at the moment. Which is not to say that it doesn't have international operations right now. In fact, Midea has manufacturing bases in Argentina, Belarus, Brazil, Egypt, India and Vietnam. But it doesn't regard this international presence as being significant enough to make it a truly global player. That requires more operations in more countries. The TLSC deal now gives Midea a majority stake in a substantial operation in Japan.
TLSC is just one of 580 subsidiaries worldwide of parent company Toshiba Corporation, founded in 1875. The parent company has 199,000 employees and a turnover of around US$55 billion annually.