GBA Brief

Frozen out? State shareholders head for the exit at Zhuhai aircon giant

State shareholders want out at Gree Electric, China’s largest air-conditioning manufacturer. The shake-up at the Zhuhai giant will set the tone for Gree’s future, with major new investors said to be interested. 

Outspoken, ambitious and always ready to try something new, Dong Mingzhu has made lots of headlines during her time as chairwoman at Gree Electric. 

And plenty of enemies as well.

We have written before about Dong’s run-ins with Gree’s largest single shareholder, the Zhuhai branch of Sasac, a government agency that holds equity stakes in thousands of the country’s state enterprises. The two have been stuck in a loveless relationship, “sharing the same bed, but dreaming differently” for years, the local media says. Dong has pushed for Gree to get into new businesses but Zhuhai Sasac has resisted, more intent on gathering a generous dividend. 

After years of failing to force the disobedient Dong into line, the state asset managers have finally had enough, putting 15% of their 18.22% stake in Gree up for sale. 

One possibility is a management buyout of the Sasac stake, led by Dong. The 64 year-old should be able to find the financial backers she needs to take control of a company that she has been running for nearly 20 years.

Then again, local officials could try to kibosh any bid with her name on it, because of the long history of antagonism. “Zhuhai’s government and the parent company disapprove of Dong’s ‘aggressive’ management style,” Caixin noted this week, citing insiders.

A long list of the usual suspects are said to be interested parties in the Gree shares although Alibaba and JD.com are reported to have already ruled themselves out.

Hopu, a leading private equity firm, is another of the frontrunners. Its pre-existing portfolio of investee firms in integrated circuits, AI and logistics might make it easier to build “an Internet of Things industry chain”, Caixin thinks, allowing Gree to diversify beyond its air conditioner business. 

Bigger picture, the Sasac sell-down comes at a time when state enterprises have seemed to have the upper hand on their private sector partners, especially in getting easier access to finance. Despite a lot of talk about ‘mixed ownership reform’, the SOEs have been slow to relinquish their grip of a number of sectors. So events at Gree Electric are bucking the trend (at least in the sense that it is waving goodbye to the Zhuhai government, its single biggest investor).

In fact, Gree has been a lot slower than local rivals like Midea and TCL in ridding itself of state shareholders. Bosses at both of those companies have made a killing since going it alone. Now that Zhuhai Sasac is getting out the context will change at Gree too. That might make it easier for Dong to take Gree in a new direction, or she might soon be locking swords with the newer group of shareholders.