Whiteware's white knight sparks takeover talk

Fisher & Paykel Appliances will reveal details this morning about its future ownership after two days of market speculation over the size of the stake its likely suitor will take.

The whiteware maker is widely expected to reveal Chinese appliance maker Haier as its white knight.

But yesterday rumours were circulating that the stake could be higher than a cornerstone 20 per cent.

Market commentator Arthur Lim said one possible scenario was that Fisher & Paykel Appliances was considering an offer by Haier to invest $200 million for a 50 per cent stake.

That would trigger a full takeover of the company but shareholders could make an exemption to allow the stake to be taken without a takeover bid.

Lim said it was also possible Haier would be happy to make a full takeover for Fisher & Paykel.

"A highly dilutory rights issue is one way to go. As we have seen with the Nuplex case it can work but it is quite an involved process, it takes a lot of time and can be expensive.

"If they can do a deal with Haier they can do it quickly. If Haier paid $200 million for a 50 per cent stake at $1 per share that would be a huge premium to the share price. That would improve the balance sheet and make people comfortable.

"If you start looking at the picture it makes sense. The panicked trading halt certainly points to it, particularly in conjunction with the share price firming in recent weeks," he said.

But other market sources said the Haier deal was highly unlikely to see a stake of 50 per cent or higher.

One source said talk of the 51 per cent stake was a red herring designed to gain support for the capital raising from institutional investors.

Haier is expected to pay 80c per share for a part stake in Fisher & Paykel Appliances as well as taking part in the capital raising.

As a result of the initial cash injection from Haier the capital raising was expected to drop to $140 million with Haier expected to take up around $20 million. The remaining $120 million would be underwritten by other institutions and offered to retail investors through a rights issue.

The price of the rights issue is expected to be set at 41 cents.

While the cash injected was viewed as positive to help shore up Fisher & Paykel Appliances' balance sheet it had the potential to stop other whiteware makers being able to put in a full takeover bid, a source warned. "Haier will get everything they want without having to buy Fisher & Paykel. They will be completely beholden to them - it's the start of a slow gradual death."

Meanwhile Fisher & Paykel Appliances yesterday said it had signed a distribution deal with Sears Outlets in the United States to distribute its lower-cost Elba product. Fisher & Paykel shares closed unchanged yesterday at 66c.