F&P Appliances to raise $189 million, Haier to buy 20%; stock soars

Wednesday 27th May 2009

Fisher & Paykel Appliances Holdings plans to raise at least $189 million via a rights issue and the sale of shares amounting to 20% of the company to Chinese appliance manufacturer Haier Group.

FPA stock soared 55% to $1.02 when it resumed trading.

The company announced equity raising including a fully-underwritten pro-rata rights issue of 41 cents a share, or $143 million, a 38% discount to its last trading price. It will sell $46 million of shares to Haier, with 17% of the holding at 80 cents apiece and the balance through a top-up. FPA also concluded a new NZ$575 million facility with its consortium of banks.

FPA will repay $165 million of debt from the proceeds of the capital raising. It also plans $106 million of property sales, inventory cuts of $114 million and a reduction in surplus raw materials amounting to about $38 million. Total debt reduction through 2010 will amount to $306 million.

A year ago, the sale of a cornerstone stake to Haier, a low-cost rival targeting the cheaper end of the global appliance market, would have been unthinkable. Since then, slumping market demand and rising debt levels pushed FPA beyond the limits of its bank facilities, requiring it to seek short-term debt arrangements while putting together a proper refinancing plan.

“Based on its current outlook, the directors are confident that the proceeds from the capital raising, together with the other debt reduction initiatives being undertaken, will be sufficient to meet the challenges of the current economic climate and the capital needs of the company,” it said in a statement today.

The rights issue is fully underwritten by Deutsche Bank AG and First NZ Capital Securities Ltd. Haier is a sub-underwriter of the rights issue and will get to positions on FPA’s board.
FPA, described as an ‘iconic’ New Zealand company by Prime Minister John Key, separately today posted a full-year loss of $95.3 million as sales slipped 2.4% to $1.37 billion.

“Slowing consumer demand as a direct result of the global financial crisis significantly impacted sales in the second half of the financial year,” the company said. Added to that were one-time net costs of NZ$48.8 million for its global manufacturing reorganization, which included relocating plants to cheaper economies or nearer to key markets.

Other one-times items included impairment of intangible assets of about $80.3 million and a net profit on the sale of New Zealand properties of $8.4 million.

Haier’s total investment in FPA will be between $80 million and $82 million.

The two companies have also signed a cooperation agreement to share market resources, undertake joint business, corporate and product planning and share technical know-how.
They will also cooperate on procurement to cut costs. Haier also gains exclusive marketing and distribution of Fisher & Paykel brand products in China, while FPA will have exclusive rights to sell Haier products in Australia and New Zealand.

The two companies will share worldwide manufacturing facilities.

FPA’s new banking facilities include:
• Term loan facility in various currencies amounting to about $290 million expiring April 2012.
• Multi currency working capital facility of about $50 million expiring April 2011.
• Letter of credit facility with an expiry date of May 2011.
• Amortising facility in kiwi and Australian dollars amounting to $235 million expiring April 2010.

FPA had debt of $518 million at March 31, which is forecast to reduce to $153 million, excluding the finance arm, in a year’s time.

The company’s total leverage ratio will reduce to 1.1 times by March 31, 2010, from 3.6 times at the end of March this year.

Businesswire.co.nz

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