Don’t have a cow

Haier goes shopping for brands

There aren’t many white goods companies capable of evoking a serious dose of nostalgia. But Liam Dann, business editor at the New Zealand Herald, professes an emotional reaction when it comes to memories of the washing machines made by Fisher & Paykel, a longstanding Kiwi appliance maker.

In what sounds like a far from misspent youth, Dann says he can still recall “the sound and feel of the spin cycle” of the Fisher machines of his childhood.

“The big pop-out dial and chunky hard-to-push buttons. It was like it was trying to launch into orbit,” he remembered fondly this week.

This follows news that Chinese white goods giant Haier has made a NZ$869 million ($721 million) bid for Fisher & Paykel, in a deal that will provide Haier with a reputable local brand as well as the target’s intellectual property.

Despite his sentimentality, Dann’s attitude towards the purchase is a pragmatic one. “The price is everything really. Forget about the emotion,” he advised readers.

The offer price looks generous. One Fisher & Paykel shareholder even described it as “a steal” (presumably in a positive sense) and that largesse may have soothed complaints that a longstanding Kiwi company is falling into foreign hands.

The purchase is also symbolic of New Zealand’s growing economic relations with China. Since New Zealand became the first developed country to sign a bilateral free trade agreement with the Chinese in 2008, the value of foreign trade between the two countries has more than doubled. China is now New Zealand’s second largest trading partner and bilateral trade is expected to grow to $20 billion by 2015.

Kiwi trade minister Tim Groser even admitted earlier this year that he judges himself on how much attention he has paid to China.

“As New Zealand’s trade minister, if I don’t make at least three trips to China a year I will be considered incompetent,” he told Xinhua.

So where is that trade relationship looking most advantageous? New Zealand is the world’s largest dairy exporter, and Chinese consumers are keen on foreign milk, following a series of scandals which have decimated confidence in the quality of local dairy.

Not that the investment relationship has been without incident. Although Groser encouraged China to boost its Kiwi investments earlier this year, one of the largest acquisitions has since been blocked after judicial intervention.

The troubled deal saw Shanghai Pengxin bid for 16 dairy farms owned by New Zealand’s Crafar Group. The NZ$210 million ($174 million) transaction was approved by the government but a consortium of rival businessmen that had lost out in the bidding war then filed for legal review in the High Court.

In its findings, the court said that Pengxin had “substantially” exaggerated the benefits of the deal for local stakeholders and that the government should reconsider its decision.

Pengxin eventually managed to overcome these obstacles and looked set to complete the purchase. But an unnamed backer has financed another legal challenge against the Chinese – this time from a Maori trust which wants back three farms which it says were wrongly acquired in the past, reports Xinhua.

Groser has pointed out that the dairy farm sale is the first Chinese deal to run into trouble in New Zealand, although it also looks like disposals of farmland on a wider basis could become a sensitive issue, given agriculture’s contribution to the national economy, as well as its role in the country’s heritage.

But there don’t seem to be similar concerns when it comes accepting the Chinese bid for Fisher & Paykel. Clearly, New Zealanders have fewer qualms about waving goodbye to their washing machine makers than to their dairy pastures.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.