In a significant move in the global home appliance market, Hisense has announced its acquisition of Toshiba's color TV business for approximately 2.4 billion yuan. This cross-border merger has sparked mixed reactions, with some industry observers calling it "foreign garbage." But is this really the case?
The deal involves acquiring 95% of Toshiba Image Solutions Inc., which translates to about 754 million yuan in cash, with the transaction expected to be finalized by February 2018. However, when considering Toshiba TVS’s liabilities—now at 1.627 billion yuan—the total cost actually reaches 2.4 billion yuan.
Financially, Toshiba TVS has been struggling. In 2016, its net assets were -729 million yuan, and by the first half of 2017, losses had increased to -247 million yuan. Despite this, the acquisition offers strategic value. Hisense is not just buying a brand; it's gaining access to Toshiba’s advanced image processing technology and OLED expertise, complementing its own ULED approach.
This move is part of Hisense’s broader internationalization strategy. With Sharp’s North American brand license set to expire in 2020, the Toshiba brand serves as a timely replacement. The acquisition also strengthens Hisense’s position in the global market, where it already outperforms Samsung and Sony in China.
Analysts argue that while the financials may look daunting, the long-term benefits could outweigh the initial costs. The 40-year licensing rights for the Toshiba brand, combined with technical synergies, can help Hisense enhance its high-end image globally. Additionally, integrating Toshiba’s R&D and supply chain resources could lead to faster time-to-market and reduced development costs.
With the decline of Japanese brands like Sharp, Panasonic, and Hitachi, the competition in the TV industry is now largely between China and South Korea. Hisense’s acquisition of Toshiba positions it strongly in this evolving landscape.
Looking ahead, despite recent profit declines, Hisense remains optimistic. The drop in gross margin is partly due to rising material costs, but with falling panel prices since mid-2017, margins are expected to improve. As smart TV adoption grows, Hisense is well-positioned for recovery growth in 2018. Analysts predict a rebound in profits, with EPS estimates rising from 0.94 to 1.55 yuan over the next three years. This bodes well for Hisense’s future as it continues to expand its global footprint.
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