F&P shares soar 50pc on news of Chinese investment

Fisher and Paykel Appliances has just revealed a $189 million equity raising, with Chinese company Haier set to take a 20 per cent stake in the troubled whiteware maker.

Shares in the company have leapt 34 cents, or 50 percent, to $1.00 on the New Zealand stock exchange after a two day trading halt was lifted.

F & P, hit hard by rising debt problems, has also announced it has organised a new bank facility worth $575 million from its existing bankers.

A full loss of $95m was also revelead this morning - a 257 percent down fall from last year.

The company was granted a trading halt on its shares on Monday, with it saying capital management initiatives ``in their totality' were incomplete and it was not yet in a position to announce them.

Its debt had swelled to $570m as it financed a shift of manufacturing to lower-cost countries and because a lower New Zealand dollar increased the size of foreign debt.

In March, it was able to broker a deal with its banks to take up an $80m loan facility which is due to be refinanced by Friday.

The Engineering, Printing and Manufacturing Union said it welcomed news of the investment, but wanted a commitment to "maximise jobs in New Zealand".

Two months ago F&P Appliances signed up to the Government-backed nine-day fortnight scheme which the union says involved "a taxpayer subsidy and a concession on annual leave by staff."

EPMU acting national secretary Bill Newson says Fisher and Paykel and its new Chinese partner need to return the faith that has been shown in the business with a commitment to its New Zealand operations.

"While we're pleased to see Fisher & Paykel now has a platform for stability we think it's right to ask for a clear commitment to the workers and taxpayers who have helped it through its recent rough patch.

"Fisher & Paykel is an iconic New Zealand brand that has done well from Kiwi consumers and Kiwi workers and its Chinese partner will understand that keeping a good relationship with New Zealand means it must commit to keeping manufacturing in New Zealand.
"This deal represents a great opportunity for Fisher & Paykel to stabilise and grow but it is vital that this growth translates to a strong and secure Kiwi workforce."


Key points of this morning's announcement:

- Haier Group Corporation to take a stake of 20 per cent.

- Haier and F&P have entered into a Co-operation Agreement setting out the areas "where the companies will work together for mutual benefit"

- Minimum $189 million equity raising launched comprising a $46 million initial placement to new cornerstone shareholder, Haier, and a fully underwritten $143 million pro-rata renounceable rights issue

- A top up placement to Haier of up to $12 million to ensure a shareholding of 20 per cent.

- Agreement of a new $575 million debt refinancing package for the Appliances business

- Planned "significant debt reduction" during 2010 of approximately $306 million during via equity raising, asset sales and planned inventory reduction.


Capital raising details :

-A $46 million placement to the new cornerstone shareholder, Haier, representing approximately 17 per cent interest in F & P following the placement, at a placement price of $0.80 per share;

- A fully underwritten $143 million pro-rata renounceable rights issue on a 1 for 1 basis, at an issue price of $0.41 per share. Haier will participate in the rights issue and will also be a sub-underwriter of the rights issue;

- A top-up placement to Haier of up to $12 million at the rights issue price.

- The rights issue is fully underwritten by Deutsche Bank AG, Auckland branch and First NZ Capital Securities Limited.

Proceeds from the capital raising are to be used to reduce debt, other than $15 million which will be applied as equity to the company's finance business.

"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," says the announcement.

"Haier is a leading global manufacturer of household appliances and electronic products. Its core product categories include refrigerators /freezers, water heaters, washing machines, dishwashers, televisions, mobile phones and personal computers."

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

F&P and Haier have also entered into a "Cooperation Agreement" to work together on a number of initiatives for the benefit of both companies.

This agreement is described as being based on the principles of:

- Sharing of market resources
- "Development of superior domestic appliance products and solutions for both companies' customers"
- Undertaking of joint business, corporate and product planning and development on a global basis to leverage, complement and enhance both companies' technical strengths
- Coordination of both companies' global manufacturing resources to lower production costs
- Optimising of the companies' sourcing of finished products, components, materials and machinery with a view to reducing procurement costs.

Specific terms within the agreement include:

-Haier's exclusive marketing and distribution of F & P products in
China.
- F&P's exclusive marketing and distribution of Haier products in
Australia and New Zealand.
- F&P has also agreed to appoint two Haier nominees to its board of directors.

The appliance manufacturer's debt has swelled to $570 million to finance a shift of manufacturing to lower cost countries and because a lower NZ dollar increased the size of foreign debt.

The increase in debt has occurred at a time when consumers are rethinking big purchases and are buying cheaper brands, especially in North America where appliances has expanded.

The company has signalled that it has been looking for a new cornerstone shareholder but few candidates have popped up in speculation.



- NZ HERALD STAFF/NZPA