Hisense Air Conditioner Co, a unit of Hisense Group, will buy 262 million non-tradable shares, at 3.43 yuan (42 US cents) each, from Guangdong Greencool Enterprise Development Co, according to Kelon's statement to the Shenzhen Stock Exchange yesterday.

The sale will take effect as soon as the company gets the approval from the Ministry of Commerce and the Qingdao State-owned Asset Supervision and Administration Commission, the company said.

The Hisense Group, one of China's leading white goods manufacturers, will retain the Kelon brand after the stake purchase, according to the Oriental Morning Post.

Kelon said trading of its yuan-denominated A shares will remain suspended. The company's Hong Kong-traded shares have been suspended since June 16.

"It is really a good buy," said Dong Chen, an analyst with China Securities. "Its brand name and marketing channels are particularly attractive to potential buyers, especially in the electrical appliance industry, where competition is red hot."

According to Dong, 900 million yuan (US$111 million) is a good price.

Greencool, Kelon's largest shareholder, has a 26.43 percent stake in Kelon, with 262 million shares.

Kelon's A shares traded last Friday at 2.78 yuan (34 US cents). This means Greencool has 728 million yuan (US$98.8 million) worth of Kelon shares, lower than Hisense's acquisition price.

A top manager at Hisense says there are various reasons for the comparatively high price.

"Hisense wants to make a breakthrough in refrigerator and air-conditioner manufacturing both of which are Kelon's strong points," he told China Daily. "Besides, Kelon is a household name and has quality assets," he added.

Just as important for Hisense as a Shandong-based company, taking over Kelon could strengthen its presence in South China.

Hisense, which started out as a maker of black goods such as TV sets, has recently turned its attention to the white-goods business. However, it still has only two air-conditioner production lines.

(China Daily September 16, 2005)