Carlyle accelerated Haier’s transition from a white goods manufacturer to a top online-to-offline integrated channel service provider for household-related products in China.
About Haier Electronics Group and the Transaction
Haier Electronics Group is one of the largest integrated channel service providers for home appliances in China, and a prominent global manufacturer of washing machines and water heaters. Headquartered in Qingdao, China with approximately 15,000 employees worldwide, Haier is listed on the Hong Kong Stock Exchange under ticker 1169.HK.
The Carlyle Group invested in Haier in July 2011 and obtained one board seat. Carlyle saw the opportunity to capitalize on the rapid growth of China’s white goods industry in 3rd and 4th tier cities. Haier’s extensive distribution network in these cities helped to create a distinct competitive advantage.
During Carlyle’s investment, Haier successfully transitioned from a white good manufacturer to a top online-to-offline integrated channel service provider for household-related products in China. Between 2010 and 2014, Haier achieved CAGR in revenue, EBITDA and net income at 16%, 21% and 26%, respectively. Carlyle completed its exit from Haier in April 2015.
Key Value Creation Metrics
- Provided strategic support by helping the board set up a three-member Strategy Committee (including the CEO, an independent director and Carlyle’s director) to guide the company’s major strategic decisions
- Provided operational support through assistance in recruiting, designing management incentive plans and organizing visits to Carlyle’s portfolio companies in the U.S. to share best practices in distribution strategies
- Improved corporate governance by increasing the number of external directors
- Provided public market support by leveraging Carlyle’s global resources and network to improve Haier’s investor relations and research coverage
Accelerated Business Model Transition
With Carlyle’s support, Haier successfully refined its position to become an online-to-offline integrated channel and logistics service provider for household-related products. In 2013, Carlyle helped Haier form a strategic partnership with Alibaba Group, the prominent e-commerce platform in China, and formed a logistics JV for the last-mile delivery and installment service for bulky e-commerce products. Carlyle also helped Haier recruit multiple senior management executives for the distribution and logistics businesses. During Carlyle’s investment period, Haier’s integrated channel service’s EBITDA as a percentage of total EBITDA increased from 25% in 2010 to 40% in 2014. The channel business has transitioned from a traditional offline brick-and-mortar distribution network into an online-offline integrated business model with a focus on logistics and after-sale services. The logistics business saw a strong 22% CAGR from 2010 to 2014, driven by the ramp-up of the 3rd party logistics business leveraging the Alibaba partnership.
Improved Corporate Governance
Carlyle has helped Haier improve its corporate governance as a publicly listed company on the Hong Kong Stock Exchange. After Carlyle’s investment, Haier increased the number of external directors from three to six out of a total of nine Board seats. Carlyle also helped introduce multiple external directors, including the former CEO of Amazon China, the Senior Vice President of Yahoo Asia, the former Executive Chairman of Amway Asia, and the CEO of Alibaba Group. The new external directors have played an important role in Haier’s strategic transition to the online-to-offline model and in optimizing its channel strategy and global expansion.