Chinese company tipped for F&P stake

Fisher & Paykel Appliances is expected to announce tomorrow it intends to raise around $180 million in new equity and Chinese appliance company Haier will take a 20 per cent stake in the company.

The whiteware maker asked to be put on a two-day trading halt yesterday amid speculation that it was close to finalising its capital raising plans and had found a cornerstone investor.

The Herald understands investment bank First NZ Capital was yesterday talking to key institutions about underwriting the capital raising, thought to be up to $200 million.

One source expected Haier to take around $40 million of that, with about $160 million needing to be underwritten by institutions before being offered to existing shareholders through a rights issue.

The Chinese appliance maker is thought to be taking a stake of slightly more than 20 per cent although it will have voting rights of only 20 per cent.

Market commentators believed anything less than $200 million would not be enough to recapitalise Fisher & Paykel, whose debt levels ballooned to $570 million at the end of March in the wake of a falling New Zealand dollar.

The rights issue price is expected to be 35c to 40c a share although Haier may pay more than that for its share to keep existing investors happy.

Fisher & Paykel last traded at 66c on Friday.

Market commentator Arthur Lim said if the cornerstone investor was Haier it could be good news for F&P.

"Having a big player like Haier could give Fisher & Paykel financial strength."

Lim said F&P could use the relationship to leverage off Haier's global marketing reach.

The potential for a successful capital raising had also greatly improved since Fisher & Paykel first signalled it back in February.

Lim said market sentiment had turned for the better and the highly controversial capital raising by Nuplex had also proven to be a success.

Forsyth Barr analyst Guy Hallwright said he was not sure why Fisher & Paykel had decided to go into a trading halt as news of a capital raising was not new.

He expected it to raise somewhere between $150 million and $200 million but was unsure whether it would raise the money in one lot or several.

Hallwright said he did not believe it was necessary for Fisher & Paykel to bring in a cornerstone shareholder.

"It's a bit of a double-edged sword. I can't really see it being sensible for another appliance manufacturer."

If an investor was brought in at the same level as existing shareholders, that could cause an upset, he said.

But a higher price could make it more palatable.

Fisher & Paykel would not comment on the Haier speculation and said it had been working with its banking syndicate with a view to refinancing the total debt of the group by May 29.

"The trading halt is requested because these capital management initiatives, in their totality, remain incomplete," it told the stock exchange.

Fisher & Paykel shocked the market in February with a trading update that revealed plunging sales figures and a big rise in its overseas debt levels because of a drop in the New Zealand dollar. The company also said it was considering a cornerstone investor and a capital raising.

In March Fisher & Paykel brokered a deal with its banks to take up an $80 million loan facility which is due to be refinanced by Friday.

Fisher & Paykel will also announce its annual results tomorrow. They are expected to be break even at best.

WHO IS HAIER?

* China's largest whiteware maker.
* Third largest whiteware maker in the world.
* 240 subsidiary companies.
* 110 design centres, plants and trade companies.
* 50,000 employees throughout the world.
* Founded in 1984 with just a single model of refrigerator.