Shares of TCL Electronics surged following the company’s announcement of plans to acquire the air conditioning division of its parent company, TCL Industries Holdings. The move aims to harness significant operational and strategic synergies, boost profitability, and strengthen financial stability.
As of 2 p.m. in Hong Kong, TCL Electronics [HKG: 1070] increased by 4.8 percent, reaching HKD14.12 (USD1.80) per share, after earlier climbing as much as 6.7 percent. Meanwhile, the Hang Seng Index was down 2.3 percent.
The company revealed that it will acquire a 51 percent stake in the air-conditioning business from five affiliated sellers of TCL Industries. The deal involves HKD167 million (USD21.3 million) in cash and 363 million newly issued shares valued at HKD15 each, representing an 11.2 percent premium over the previous day’s closing price of HKD13.48.
Following the deal, TCL Industries’ direct and indirect ownership in TCL Electronics will decrease from 54.5 percent to 51.5 percent.
TCL Industries operates 12 air conditioning factories, including eight outside China, with an annual output capacity of 38 million units. Last year, its sales exceeded 22 million units, with 76 percent of those sales generated from international markets.
Revenue from TCL Industries’ air-con segment grew 16 percent last year to approximately HKD33.8 billion (USD4.3 billion), while the related net profit after tax increased about 40 percent to HKD1.9 billion. In the first quarter of this year, its profit stood at HKD300 million.
The company remains optimistic about the future growth prospects of the air conditioning business, citing the rising frequency of extreme temperatures worldwide and the relatively low adoption rate of air conditioners in emerging markets such as Southeast Asia, Latin America, and Africa. There is also considerable potential to increase penetration rates in second- and third-tier cities across China.
The acquisition is expected to help TCL Electronics transform into a comprehensive home appliance platform, according to Guolian Minsheng Securities. This strategic expansion should improve risk resilience and create synergies in decision-making, R&D, and operations across the air conditioning and television segments.
Currently, TCL Electronics mainly focuses on selling televisions, ranking second globally by shipment volume. The company previously projected a net profit increase of 40 to 56 percent for the first half of the year, reaching between HKD1.5 billion and HKD1.7 billion, with revenue anticipated to grow 10 to 20 percent to between HKD60.3 billion and HKD65.7 billion.