Haier Smart Home Co., Ltd. Class A · SSE:600690
Haier Smart Home Co., Ltd. Class A — Merger or Acquisition (July 2020)
55 slides from Haier Smart Home Co., Ltd. Class A's merger presentation, July 2020
Slide 1: HSH's Proposal for the Privatisation of HEG – Investor Presentation
HSH’s Proposal for the Privatisation of HEG involving H-share Issuance and Listing by Introduction ——Investor Presentation July 2020 1 1
Slide 2: Disclaimer
Disclaimer Reference is made to the joint announcement published by Haier Smart Home Co. Ltd.* (“HSH”) and Haier Electronics Group Co., Ltd. (“HEG”) dated 2020 pursuant to Rule 3.5 of the Takeovers Code in relation to the pre-conditional proposal for the privatisation of HEG by HSH by way of a schem
Slide 3: Disclaimer (Cont'd)
Disclaimer(Cont’d) It may be difficult for US holders of Scheme Shares or holders of Scheme Shares in the Relevant States to enforce their rights and claims arising out of the US federal securities laws and the Relevant States' securities laws, since HSH and HEG are located in a country other than t
Slide 4: Disclaimer (Cont'd)
Disclaimer (Cont’d) All statements, other than statements of historical facts included in this Presentation, are or may be forward-looking statements. Forward-looking statements include, but are not limited to, those using words such as “seek”, “expect”, “envisage”, “anticipate”, “estimate”, “believ
Slide 5: Table of Contents
Table of Contents Chapter I Transaction Summary 6 Chapter II Overview of Haier Smart Home Co. Ltd. (“HSH”) 10 Section I HSH Overview 11 Section II Investment Highlights 20 Chapter III Benefits for Shareholders of Haier Electronics Group Co., Ltd. (“HEG”) 34 Section I Financial Benefits 35 Section II
Slide 6: Chapter I: Transaction Summary
Chapter I: Transaction Summary 6
Slide 7: Transaction Summary
Transaction Summary • Haier Smart Home Co., Ltd. (“HSH”) is proposing to put forward a proposal for the privatisation of Haier Electronics Group Co., Ltd. (“HEG”) by way of a scheme of arrangement. Scheme Shareholders are HEG Shareholders other than HSH and any of its wholly-owned subsidiaries. Sche
Slide 8: Key Terms of the Transaction
Key Terms of the Transaction Offeror • HSH, ticker: SSE: 600690 and 690D.DF Offeree • HEG, ticker: SEHK: 1169 Transaction • By way of a scheme of arrangement under Section 99 of the Companies Act 1981 of Bermuda (as Structure amended) • New HSH H Shares: 1.60 new HSH H Shares for every Scheme Share
Slide 9: Milestones and Approval Process
Milestones and Approval Process HSH H Share Listing Obtains the notice Obtains final HSH General of acceptance (小 approval (大路条) Meeting, HSH A 路条) from the from the Shares Class Department of Department of Scheme Meeting and HSH D International International Effective and Submits notice of Publishe
Slide 10: Chapter II Overview of Haier Smart Home Co. Ltd. ("HSH")
Chapter II Overview of Haier Smart Home Co. Ltd. (“HSH”) 10
Slide 11: Section I HSH Overview
Haier Section | HSH Overview
Slide 12: Staying True to Entrepreneurship in a Changing World
Staying True to Entrepreneurship in a Changing World Global Home Appliance Leader IoT Pioneer No. 1 Globally and in China Scenarios Top 100 Most Valuable & Global Brands Fortune 500 14.7% 23.2% Connected home Ecosystem BrandZ 2019 appliances 2019, 2020 2019 global major 2019 China major Smart Home S
Slide 13: Global Brand Portfolio and Operating Platform
Global Brand Portfolio and Operating Platform 2 63 42 China Europe 1 10 42 R&D Centres Manufacturing East & Southeast Facilities Asia Offices 1 2 7 8 Middle East Americas and Africa South Asia 2 6 1 11 3 3 9 3 Australasia 1 7 4 R&D Manufacturing Distribution Pioneering the user-centric “mass Seamles
Slide 14: Prospect of IoT Ecosystem on the Foundation of Customer Experience
Prospect of IoT Ecosystem on the Foundation of Customer Experience Driven by Cloud system Connecting Billions of Families and Building One Ecosystem Together • Initially delivering high-quality home appliances and then innovating scenario-based IoT products, HSH integrates designers, experience stor
Slide 15: Business Segments with Leading Positions
Business Segments with Leading Positions Revenue and Profit Breakdown1 Domestic Other business Others refrigerators 0.55% 11% 15% Domestic kitchen Overseas smart appliances home business Domestic 1% 37% refrigerator business 25% Domestic washing machines 2019 Segment Smart home 2019 Segment 11% Prof
Slide 16: Strong Revenue and Profit Growth
Strong Revenue and Profit Growth Revenue1 Profit Attributable to Owners of HSH1 (RMB bn) (RMB bn) CAGR 2=22% Margin 4.8% 4.2% 4.5% 4.2% 4.1% CAGR 2=18% 198.0 177.6 8.2 7.5 154.2 6.9 119.1 5.0 89.8 4.3 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 • Profit attributable to owners of HSH continues
Slide 17: Solid Cash Flow and Return on Equity
Solid Cash Flow and Return on Equity Free Cash Flow1 Cash Conversion Cycle2 (RMB bn) (Days) 12.0 7% HSH 40 10.0 35 HSH 10.0 6% 9.2 6% 29 5% 5% HEG 8.0 18 4% 4% 6.0 5.0 6 6 HEG 3% 3% HSH: As % of 4.0 2.7 Revenue 2% 2% 2% 2017 2018 2019 2.0 1.3 1.3 1% HEG: As % of Revenue Continuous inventory manage
Slide 18: Strategic Investment for the Future
Strategic Investment for the Future Overseas Investment1 Revenue Growth & Market Share Expansion2 Localized Operations M&A 14.8% 48% Committing to localized operations Overseas Capex Overseas M&A CAGR of Overseas revenue and global RMB8.4bn RMB5.7bn overseas as % of total collaboration 2017-2019 201
Slide 19: Mitigating COVID-19 Impact through Digital Transformation
Mitigating COVID-19 Impact through Digital Transformation Prioritize workplace health and safety Successful domestic pandemic containment practices introduced overseas Effective global supply chain response Phase 3 Phase 2 Post Phase 1 Pandemic Digital Recovery Work Transformation Resumption Pandemi
Slide 20: Section II Investment Highlights
Section II Investment Highlights 20
Slide 21: Well-positioned Globally to Sustain Leadership in the Future
Well-positioned Globally to Sustain Leadership in the Future Existing Advantages Existing Strategic Advantages Global Expansion 1 China 2 Overseas Market Market Appliance Leader Achieving Further with Dominance in Growth via Localized High-end Segment Operation in Both Developed and Strategic Emergi
Slide 22: Leading Market Share and Solid Performance
China Market 1.1 Leading Market Share and Solid Performance Leading Market Share1 Refrigeration Home Laundry Water Large Kitchen Air- Appliances2 Appliances3 Heaters Appliances conditioners Ranking in 2019 1 1 1 3 3 Market Share 42.0% 43.9% 22.0% 9.0% 12.0% in 2019 Solid Performance Revenue Segment
Slide 23: Casarte — Leader in High-end Market
China Market 1.2 Casarte — Leader in High-end Market Leader in High-end Market Rapid Growth Market Share of Casarte’s Revenue Air-conditioners (RMB bn) 3 Priced over 2019 RMB15,0001 Market Share of Growth of Casarte’s Washing Machines Revenue as % of HSH Priced over 28% 7.6 Revenue3 RMB10,0001 2017-
Slide 24: Continuous Upgrade of Smart Home Solutions
China Market 1.3 Continuous Upgrade of Smart Home Solutions Leveraging on our competitive advantage in innovative and diversified products, HSH designs, implements and provides solutions of full-suite smart home products With integrated packages of appliances and interior design, HSH’s business expa
Slide 25: Revitalizing Air-conditioner Business
China Market 1.4 Revitalizing Air-conditioner Business Strengthen Presence Enhance Efficiency 1) Increase distribution competitiveness through 1) Streamline SKUs and identify best sellers further penetration in villages 2) Reduce cost by aggregated procurement and 2) Break through e-commerce channel
Slide 26: Market Share Expansion and Growth in Profitability Overseas
Overseas Market 2.1 Market Share Expansion and Growth in Profitability Overseas Market Share1 1 2 2 3 5 market share and 22.0% ranking in global major 18.6% N Ranking 20191 1 +0.5% +2.1% home appliance industry 13.4% 2019 1 Market Share by Retail Volume +0.6% 8.4% 7.2% 2017 +0.7% +4.8% Market Share
Slide 27: Well-recognized Brand Portfolio Serving Diversified Users
Overseas Market 2.2 Well-recognized Brand Portfolio Serving Diversified Users Overseas strategy of proprietary brands Global brand portfolio with comprehensive coverage Self-grown Brands Integrated Brands (Outdoor kitchen appliances) • Ranked first in Australia & New Zealand’s major household applia
Slide 28: Successful M&A and Integration
Overseas Market 2.3 Successful M&A and Integration A Series of Success Acquired Sanyo’s white goods business in 2015, GEA in 2016, FPA in 2018, and Candy in 2019 Promote Integration 1 RenDanHeYi model injects vitality 2 Global platform supports growth Thriving GEA Initiatives Performance1 R&D Produc
Slide 29: Resource and Experience Sharing on a Unified Platform
Global Collaboration 3.1 Resource and Experience Sharing on a Unified Platform R&D Product Development • Co-develop high-end products • Leveraging on each other’s competitive strength • R&D collaboration in components and technology • Regional product collaboration • Share of Patents Applied to Supp
Slide 30: GEA's Case — Capture Market Share with Successful Launch of New Front-loader
Global Collaboration GEA’s Case —Capture Market Share with Successful 3.2 Launch of New Front-loader Qingdao, China • Hydraulic Units and Packaging Primary Manufacturing Location Target Market Nuremberg, Germany Kyoto, Japan Louisville, United States • Algorithm • lndustrial design • Controls system
Slide 31: User-oriented Global Distribution Network
Efficiency Enhancement 4.1 User-oriented Global Distribution Network Direct interaction with Users China market: ongoing efficiency reform Digital distribution network with extensive Constantly promoting channel integration and efficiency enhancement town level coverage “Integrated warehouse and dis
Slide 32: Embark upon the Digital Transformation
Efficiency Enhancement 4.2 Embark upon the Digital Transformation Building A Digitalised Enterprise of technologies From operation control to full value chain vitalization From process automation to business intelligence Smart Home HOPE “Cloud Brain” System Global collaboration of AI+IoT system that
Slide 33: Unlock Our People's Potential with RenDanHeYi Model
RenDanHeYi 5 Unlock Our People’s Potential with RenDanHeYi Model in the Creation of Outstanding User Experience RenDanHeYi Model Experienced and Talented Management Team Our people can realize Haier’s success is the result of a individual value when root-and-branch overhaul of its creating value f
Slide 34: Chapter III: Benefits for Shareholders of Haier Electronics Group Co., Ltd. ("HEG")
Chapter III: Benefits for Shareholders of Haier Electronics Group Co., Ltd. (“HEG”) 34
Slide 35: Section I: Financial Benefits
Section I: Financial Benefits 35
Slide 36: Financial Benefits to Scheme Shareholders -- Summary
Financial Benefits to Scheme Shareholders -- Summary Earnings per Share (EPS) accretion for Scheme Shareholders • Excluding the Cash Payment, the pro forma EPS accretion of the proposed privatisation for Scheme Shareholders shall be 9.9%2 Financial Return for Scheme Shareholders Total value of the t
Slide 37: Financial Benefits to Scheme Shareholders -- Total Return
1 Financial Benefits to Scheme Shareholders -- Total Return • The implied premium of the proposed transaction (sum of the HSH H Shares & Cash Payment) is in line with average premium offered in the share exchange privatisation precedents in Hong Kong Stock Exchange HEG Shares Performance and Implied
Slide 38: Financial Benefits to Scheme Shareholders -- Considerable EPS Accretion
2 Financial Benefits to Scheme Shareholders -- Considerable EPS Accretion EPS for Scheme Shareholders • Based on the RMB4.10bn and RMB6.72bn profit from continuing operations attributable to owners of HEG and HSH in 2019 and the Share Exchange Ratio, the pro-forma EPS for Scheme Shareholders will in
Slide 39: Financial Benefits to Scheme Shareholders -- HSH Shares with Greater Return
3 Financial Benefits to Scheme Shareholders -- HSH Shares with Greater Return • The Enlarged HSH Group is committed to increase its pay-out ratio in the future Stronger Growth Cash Dividend Revenue2 Historical dividend pay-out ratio1 After the Scheme becomes effective, HSH plans to increase its divi
Slide 40: Section II Potential Synergies
Section II Potential Synergies 40
Slide 41: Potential Synergies from the Transaction -- Enhance Operational Efficiency
Potential Synergies from the Transaction 1 -- Enhance Operational Efficiency 1 Consolidate Product Portfolio Accelerate Development of Washing 2 Machines and Water Appliance Overseas Leverage on HSH’s global platform in the Provide full scenario and customized user experience development of washing
Slide 42: Potential Synergies from the Transaction (Cont'd) -- Increase Shareholder Return
2 Potential Synergies from the Transaction (Cont’d) -- Increase Shareholder Return 1 Optimize Capital Allocation Aggregate capital allocation Optimize capital structure • Reduce leverage ratio HSH Dividend Onshore Dividend tax under HEG red-chip Offshore structure Dividend Onshore Operating Entity o
Slide 43: Potential Synergies from the Transaction (Cont'd) -- Improve Corporate Governance
3 Potential Synergies from the Transaction (Cont’d) -- Improve Corporate Governance 1 Design Incentive Programme for Global Employees 3 Raise ESG Standards The listing of H share accommodates our desire for Commit to sustainable business development a global and flexible approach in retaining the be
Slide 44: Appendix
Appendix 44
Slide 45: Overview of Chinese Major Home Appliance Industry
1.1 Overview of Chinese Major Home Appliance Industry Overall Growth Slows Down Fierce Competition Increasing Concentration 2017-2022 Retail Revenue and Growth Rate of 2017-2022 Retail Volume and Growth Rate of Major Home Appliances in China1 • Price competition will continue to increase the concent
Slide 46: Overview of Chinese Major Home Appliance Industry (Cont'd)
Overview of Chinese Major Home Appliance Industry (Cont’d) 1.1 -- The Home Appliance Industry Is Becoming Integrated, Intelligent, Scenario- based and Full-suite Solutions Home Appliance Consumption towards Integrated, Intelligent, Scenario-based and Full-suite Appliance Solutions Driven by User Dem
Slide 47: Overview of Chinese Major Home Appliance Industry (Cont'd)
1.1 Overview of Chinese Major Home Appliance Industry (Cont’d) -- Diversified Distribution Ecosystem and Online-Offline Integration Increasingly Diversified Distribution Network with Online-Offline Integration 2017-2019 Retail Volume Breakdown of Major Home Appliances in China, by Channel (Million U
Slide 48: Overview of Global Major Home Appliance Industry
1.2 Overview of Global Major Home Appliance Industry Retail Revenue and Retail Volume of Global Major Home Appliance Leading Players Maintained Solid Market Share; Haier Maintain Growth Rate of 3%-6% in 2021-2022 Ranked No. 1 with 15% Market Share by Sales Volume 2017-2022 Retail Revenue and Growth
Slide 49: Overview of Global Major Home Appliance Industry (Cont'd)
1.2 Overview of Global Major Home Appliance Industry (Cont’d) -- Broad Development Space in Overseas Market Europe and US Markets Show Clear Intellectualization Trend and Penetration Increase in Developing Appliance Upgrade Becomes Future Growth Driver Countries a a Appliance market continue to gro
Slide 50: Valuation Analysis of HSH H shares -- Methodology Overview
2.1 Valuation Analysis of HSH H shares ——Overview 1 Global Comps 2 SOTP 3 Direct Comps Selected comparable companies based on the following principle: (i) listed on a stock Select HEG, which is a key subsidiary Description exchange globally; (ii) engaged in of HSH and highly comparable to manufactur
Slide 51: Valuation Analysis of HSH H Shares -- Comparable companies overview
2.2 Valuation Analysis of HSH H Shares -- Comparable companies overview Criteria of Comps • Listed on a stock exchange globally • Engaged in manufacturing and/or sale of home appliances and other related products, with revenue generated globally from Asia, Europe and North America • Market capitalis
Slide 52: Valuation Analysis of HSH H Shares (Cont'd) -- SOTP valuation methodology
2.3 Valuation Analysis of HSH H Shares (Cont’d) -- Overview of the SOTP valuation methodology HSH’s SOTP Valuation HEG Non-HEG HSH’s Non-HEG’s share of net profit Non-HEG HEG’s market from continuing operations shareholding attributable to ordinary equity Comps’ capitalization percentage holders of
Slide 53: Valuation Analysis of HSH H Shares (Cont'd) -- Implied A/H Discount
2.4 Valuation Analysis of HSH H Shares (Cont’d) -- Implied A/H Discount Based on the Valuation Report1, the mid-point of the valuation range of new HSH H Share is HK$18.47 . Based on the A-share stock price as of the date of the H-share valuation report, the implied A/H discount is 7.3%2 Implied A/H
Slide 54: Valuation of Home Appliance Targets in Global Precedent Transactions
Valuation of Home Appliance Targets in Global Precedent 2.5 Transactions Criteria for Precedent Transactions • Announced and completed transactions between January 1, 2010 and December 31, 2019 , where the target companies are mainly engaged in white goods production and sales (excluding black appli
Slide 55: Thank You!
Thank You! www.haier.com 55