Country Garden Holdings, one of China’s biggest real estate companies, is stepping up its pace in industrial integration. In only half a year, Country Garden has purchased the shares of four leading building material suppliers in the sectors of ceramic tiles, sanitary wares, coating materials, and curtain walls with a total value of RMB 1.441 billion yuan.
On May 20, 2020, Country Garden reached an agreement with Huida Sanitary Ware on a purchase of 50,609,756 shares which valued at around RMB 415 million yuan, accounting for 11.76% of Huida’s stock.
On May 5, 2020, Country Garden bought 27,129,679 shares of Monalisa Ceramics’s non-public offerings at a price of RMB 500 million yuan. After the completion of the subscription, Country Garden would hold 6.22% of Monalisa’s shares.
On April 12, 2020, Monarch Sanitary Ware & Oceano Ceramics announced an agreement for the acquisition of a 6.5% stake by Country Garden, which included 26,766,595 shares at a value of RMB 500 million yuan.
On November 26, Country Garden subscribed for 3,903,900 shares of Kuck Coatings at a price of RMB 26 million yuan, which accounted for 4.84% of Kuck’s stock.
Frequent Attendance in Ceramic Expos
Strengthening Cooperation with Stable Business Partners
Actually in the last two years, the president of Country Garden Mr. Yang Guoqiang had frequently showed up in the ceramic exhibitions. He led a team in person to attend the UNICERAMICS Expo and spent hours looking for a suitable tile. And in the June of 2019, Mr. Yang visited quite a few of the leading ceramic enterprises in China including the New Pearl Ceramics and Hongyu Ceramics. Hongyu Ceramics even built an exclusive warehouse for Country Garden.
The unusual visits of Mr. Yang was the sign of Country Garden’s ambition to expand its empire. Country Garden was discreet in the decision of choosing who to cooperate. The building material suppliers that Country Garden chose through buying shares are all leading enterprises in the industry and have stable business relationship with Country Garden.
According to the annual financial report of Monarch Sanitary Ware & Oceano Ceramics, among its total sales revenue of 3.681 billion yuan, Country Garden consumed 2.041 billion yuan, making it Monarch & Oceano’s number one client. And in 2019, Country Garden continued to spend 1.328 billion yuan to buy Monarch & Oceano’s products.
Monalisa also mentioned in its 2018 annual report that it had developed strategic cooperation with various real estate giants including Country Garden in the engineering projects. Country Garden had spent 431 million yuan on Monalisa’s tiles in 2018, and 371 million in 2019.
Monalisa, Monarch & Oceano, and Huida Group are the few listed ceramic enterprises in China. And Kuck Coatings is among the 100 top coating enterprises in China and ranked 48 in 2019 with a sales revenue of 632.5 million yuan.
10.3 Billion Yuan to Build Producing Bases
Country Garden Manufactures Its Own Furniture
Besides backward integration, Country Garden also spared money in developing its own home furnishing products, including doors, cabinets, sanitary ware units, and smart sanitary ware. It has invested more than 10.3 billion yuan in building the producing bases.
In April 2019, Country Garden signed a cooperation agreement with Chaozhou (a city in the east of Guangdong Province) government. Country Garden spent 5 billion yuan in building an industrial park of 666,667 square meters as a producing base for smart sanitary wares. The producing capability of the base is estimated to be 1.4 million pieces per year. The base is expected to put into production in October, 2020.
In addition, Country Garden and Zhaoqing Modern ZHUMEI Home Furnishings co-invested 2.3 billion yuan in building a smart home industrial park to produce cabinets and doors. And a wholly-owned subsidiary of the Country Garden, Guangdong Bright Dream Robotics invested 3 billion yuan in building a smart manufacturing base which produced sanitary ware units and kitchen units.
Ceramic Enterprises Come to Realize
Integration is Inevitable
Mr. Bao Jiejun, President of Oceano Ceramics, said that the strategic investment of Country Garden in Oceano and Monalisa implied a promising future of the ceramic industry. “Only if the ceramic industry is still thriving, big real estate companies like Country Garden would like to deepen the cooperation.” said Mr. Bao.
Mr. Zhang Qikang from Monalisa Ceramics commented that the purchase of Monalisa’s shares by Country Garden showed another effort of Country Garden to integrate the upstream of the real estate industrial chain.
With the increasing influence from the capital market, more and more ceramic companies in China come to realize the inevitable trend of industrial integration. The president of Dongpeng Ceramics, Mr. He Xinming said “Cross-industry integration is good, not bad, as enterprises can thus enjoy the benefits of resource complementation and sharing, which at the same time promotes the development of the industry.”
This is the 387th issue.