Bulletin: Midea Group Co. Ltd. Rating Unaffected By Proposed Acquisition Of Toshiba Lifestyle Products&Services Corp.

HONG KONG (Standard&Poor's) March 31, 2016--Standard&Poor's Ratings Services said today its ratings and outlook on Midea Group Co. Ltd. (A-/Stable/--; cnAA/--) are not affected by the company's proposed acquisition of of Toshiba Lifestyle Products&Services Corp. (TLSC). We believe Midea has ample financial resources to absorb the impact of the acquisition. TLSC is a wholly owned home appliance subsidiary of Japan-based diversified electronics company Toshiba Corp. We expect Midea to maintain its net cash position and a good distance from our downgrade triggers (i.e. a debt-to-EBITDA ratio approaching 1.5x or free operating cash flow turning negative), even if this transaction is fully debt-funded. As of Dec. 31, 2015, Midea has cash and cash equivalents of

...HONG KONG (Standard & Poor's) March 31, 2016--Standard & Poor's Ratings Services said today its ratings and outlook on Midea Group Co. Ltd. (A-/Stable/--; cnAA/--) are not affected by the company's proposed acquisition of of Toshiba Lifestyle Products & Services Corp. (TLSC). We believe Midea has ample financial resources to absorb the impact of the acquisition. TLSC is a wholly owned home appliance subsidiary of Japan-based diversified electronics company Toshiba Corp. We expect Midea to maintain its net cash position and a good distance from our downgrade triggers (i.e. a debt-to-EBITDA ratio approaching 1.5x or free operating cash flow turning negative), even if this transaction is fully debt-funded. As of Dec. 31, 2015, Midea has cash and cash equivalents of about Chinese renminbi (RMB) 40 billion (about US$6 billion) and total debt of only about RMB4.4 billion. The integration of TLSC is likely to reduce the profit margin for the combined entity, given that TLSC was loss-making in...

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