UPDATE 1-KKR buys stake in appliance maker in biggest China deal

* Third Asian deal in the past week

* China's home appliance market expected reach $105 bln in next two years

* Qingdao trades at historic P/E of 10.6 times

By Stephen Aldred and Denny Thomas

HONG KONG, Sept 30 (Reuters) - Investment company KKR & Co LP said it had agreed to buy a 10-percent stake in Qingdao Haier Co Ltd, gaining exposure to China's home appliances market with its biggest investment in the country to date.

The acquisition, which is subject to shareholder and regulatory agreement, is KKR's third Asian deal in a week as it begins to invest its new $6 billion Asia fund, the region's largest ever.

The companies did not disclose the deal value, but a person familiar with the matter said New York-headquartered KKR paid around $550 million.

For the Chinese maker of washing machines and refrigerators the deal means a link to a global investment firm that could help it expand beyond its local market.

For KKR, the deal offers a stake in a firm that is inexpensive compared with peers and part of China's booming consumer market.

Foreign firms have been keen to access China's home appliance sector, which is forecast to grow by about one-fifth in the next two years to $105 billion, according to data from consultancy Euromonitor.

KKR's purchase comes less than two months after Whirlpool Corp, the world's largest maker of home appliances, agreed to buy a majority stake in China's Hefei Rongshida Sanyo Electric Co Ltd for $552 million.

In 2011, Carlyle Group paid $468 million for a 9.4 percent stake in Haier Electronics Group, a company controlled by Qingdao.

Qingdao Haier, which makes and distributes washing machines, refrigerators, air-conditioners and other appliances, has a market value of some $5.8 billion. Trade in its shares was halted on Sept. 12, pending an announcement.

Founded in 1984, Haier Group was a collection of factories on the verge of bankruptcy before transforming itself into a global consumer brand with 70,000 employees.

Qingdao Haier owns a 47.9 percent stake in Hong-Kong listed Haier Electronics Group, according to Thomson Reuters data.

UNDER VALUED

For KKR, the purchase comes at a low point in Qingdao Haier's valuations. The stock trades at a trailing price-to-earnings ratio of 10.6, making it the second-least expensive home appliance maker in the Asia-Pacific behind Gree Electric Appliances Inc of Zhuhai, Thomson Reuters data showed.

The Chinese home appliance industry is battling higher labour and operating costs and Chinese consumers are unwilling to pay a premium for local products.

Despite the sluggish retail market, KKR believes Qingdao Haier's stock is undervalued, and sees room for growth in China's home appliances market, according to a source with knowledge of the firm's investment strategy.

"If you look at the market today, the penetration of white goods is about the same level as Japan and the U.S. 30 years ago," the source said.

The source added that in China, 87 out of every 100 homes has a fridge, but the ratio in the US is 150 fridges to every 100 homes. KKR also expects to help Qingdao Haier with acquisitions, the source added.

KKR said last week it would lead a joint venture with China Modern Dairy Holdings Ltd and a Chinese private equity firm that would invest $140 million in two large dairy farms.

KKR said on Friday it had agreed to pay $1.7 billion for Panasonic Corp's healthcare unit, in the largest private equity offer in Asia this year.

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Mild cognitive impairment in L. America, China and India

One of the first studies to investigate the prevalence of mild cognitive impairment (MCI) in low and middle income countries finds that MCI does not depend on socio-demographic factors, and is associated with disability and neuropsychiatric symptoms. 

The research was led by the 10/66 Dementia Research Group based at the Institute of Psychiatry at King’s College London and published today in PLoS Medicine. 

MCI is an intermediate state between normal signs of cognitive aging, such as becoming increasingly forgetful, and dementia, and may be linked to an increased risk of dementia, 

The research group interviewed roughly 15,000 people aged over 65 years who did not have dementia in eight low and middle incomes countries—Cuba, Dominican Republic, Peru, Mexico, Venezuela, Puerto Rico, China, and India. 

Their mental and physical health, cognitive function were also assessed and their relatives and carers interviewed for further details about any memory loss, any other decline in cognitive function or the presence of any neuropsychiatric symptoms. 

The prevalence of MCI ranged quite widely, from 0.8% in China to 4.3% in India. They found that age or level of former education did not seem to be linked to MCI and that men had a slightly higher prevalence of MCI than women. The authors found that MCI was associated with disability, anxiety, apathy and irritability but not with depression. 

Dr Robert Stewart, senior author of the paper at the IoP at King’s says: ‘By 2050, it’s estimated that more than 115 million people will have dementia, and much of the expected increase will occur in low and middle income countries where the population is rapidly ageing.

‘I hope that the information on MCI in low and middle income countries we report in this study could help inform health care and social service planning in these rapidly ageing and highly populated regions of the world.’

The authors added that more long-term studies are needed to investigate whether MCI can be used as a reliable marker for further cognitive decline and dementia, and into the associations with disability and neuropsychiatric symptoms. 

Dr Stewart adds: ‘It is also worth considering whether cultural influences may impact upon the identification of MCI – it may be that people in certain countries may be more or less likely to admit to memory difficulties. Whilst this may help in part explain the variation between countries, the association between MCI and disability remained constant throughout.’

The 10/66 Dementia Research Group is supported by the Wellcome Trust (UK), the World Health Organization, the US Alzheimer’s Association and the Fondo Nacional de Ciencia Y Tecnologia, Consejo de Desarrollo Cientifico Y Humanistico, Universidad Central de Venezuela (Venezuela). The lead author is funded by the National Institute for Health Research (NIHR) Specialist Biomedical Research Centre for Mental Health at the South London and Maudsley NHS Foundation Trust and Institute of Psychiatry, King’s College London. 

For full paper: Sosa, A.L. et al. ‘Prevalence, Distribution, and Impact of Mild Cognitive Impairment in Latin America, China, and India: A 10/66 Population-Based Study’ (7th February 2012) PLoS Medicine doi: 9(2): e1001170. doi:10.1371/journal.pmed.1001170

For more information, please contact Seil Collins (Press Officer) email: seil.collins@kcl.ac.uk or tel: 0207 848 5377

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