Text︱Mudslide

Hisense Electric announced on November 14 that Hisense Electric and Toshiba *** signed the "Regarding the Equity Interest of Toshiba Visual Solutions Corporation" on the same day. "Transfer Agreement", it is planned to transfer 95% of the equity of TVS held by Toshiba with 12.916 billion yen (approximately RMB 798 million) of its own funds, and Toshiba will retain 5% of the equity. After the equity transfer is completed, TVS will become a holding subsidiary of Hisense Electric (TVS is mainly engaged in the research and development, production, sales and cloud services of televisions and related peripheral equipment, commercial displays, HomeIOT and other multimedia products). Hisense will receive a 40-year global brand license from Toshiba TV.

Hisense Electric stated that this acquisition will further expand the company’s global layout of R&D, branding and marketing in the TV business, by integrating the R&D, supply chain and global channel resources of both parties, and mutually reinforcing display technology. By learning from each other's strengths, we can provide competitive smart TV content operation services to the world, comprehensively enhance the company's global influence and comprehensive competitiveness, and accelerate the internationalization process, which is of great significance to the company's long-term development.

Affected by the failure of investment in the nuclear power business and the financial fraud scandal, Toshiba has carried out significant layoffs in the past two years and began to restructure its business. Moreover, Toshiba's financial problems are very serious. According to the regulations of the Tokyo Stock Exchange, it must reverse its insolvency status by the end of March 2018, otherwise it will be forced to delist. The company has sold non-core businesses such as televisions, white goods (electrical products that can replace people's housework), and medical equipment, and invested its operating resources in key business areas such as social infrastructure, energy, electronic components, and ICT solutions.

Toshiba was the first company in Japan to launch color TVs, and TVs were once its flagship product. However, under the impact of Chinese and Korean brands, the market performance of Japanese home appliance brands is declining day by day, and Toshiba's TV business is also deteriorating. After 2015, Toshiba has changed its overseas TV business to a brand licensing model, focusing on development and sales in Japan. The sale of TVS means Toshiba's complete withdrawal from the TV market.

Although Toshiba is in deep crisis, data shows that Toshiba’s TV sales in 2016 still ranked among the top three in the Japanese market. The acquisition of TVS will help Hisense increase its influence in the Japanese TV market, and will also be beneficial to Hisense's brand image at home and abroad.

Some insiders pointed out that Hisense Electric’s acquisition of Toshiba TV may be to enter the OLED TV field.

Hisense has good technology accumulation in the fields of laser TV, ULED TV and smart TV, but it has no advantages in the two fields of OLED TV and QLED TV that are gradually rising. Toshiba's unique OLED image quality engine technology and super-resolution technology are among the best in the Japanese TV industry. Its high-end OLED TVs are very popular in the international market and are expected to strengthen Hisense's technical strength in this area.

Liu Hongxin, President of Hisense Group and Chairman of Hisense Electric, also said, "After the acquisition, Hisense will integrate the R&D, supply chain and global channel resources of both parties to rapidly increase the market scale and accelerate the internationalization process."

However, some people have expressed concerns about this acquisition, believing that Hisense's acquisition of Toshiba TV is similar to its acquisition of Sharp's Mexican factory. Both deals involved the acquisition of a business and several years of trademark rights from international companies in financial distress.

Due to financial crisis, Sharp sold Sharp's Mexican factory to Hisense in 2015 for US$23.7 million, and gave Hisense the five-year trademark use rights for Sharp's LCD TVs in the North American market. The two parties agreed. The right to use is valid until January 5, 2021.

However, Sharp was acquired by Foxconn and after surviving the financial crisis, it immediately sued Hisense Group in the United States. It believed that Hisense violated the contract by selling low-quality goods and requested to take back its trademark use rights in North America. Sharp also cut off panel supply from Hisense Group. Currently, the overseas lawsuit between Hisense Group and Sharp is still ongoing.

Affected by the news, Hisense Electric opened higher today, reaching a peak of 16.26 yuan, then fell, and finally rose slightly by 0.45%

Related stocks: Hisense Electric (SH.600060)