Deloitte FA as sole advisor for Philips' disposal transaction

Transaction highlights

On 29 June 2018, Foshan Shunde Deerma Electronic Appliance Co., Ltd. ("Deerma"), a wholly owned subsidiary of Guangdong Feiyu Electronic Commerce Group Co., Ltd. ("Feiyu Group") announced the signing of a share purchase agreement with Philips. Under the agreement, Philips will transfer its water purification business in Greater China to Deerma. In addition, Philips grants Deerma exclusive brand license to use Philips trademark in marketing, distribution, sale of water purification products as well as providing after-sale services. The trademark licensing will be effective for a period of 20 years with conditionally automatic renewal term. Financial details of the transaction have not been disclosed.

Deloitte China Corporate Finance Advisory team ("CFA team") was engaged by Philips to provide exclusive sell-side financial advisory services for the transaction. With seamless collaborative efforts from Deloitte China M&A Transaction Services team, M&A Tax team and Business Tax team, CFA team has led the transaction by providing a full spectrum of one-stop advisory services from financial advisory, vendor financial assistance, tax due diligence to structure planning and implementation based on tax considerations. Led by Yudong Yuan, the Shanghai-based Corporate Finance Advisory Team was in charge of the overall engagement, backed by the full dedication of Tony Li, Zitong Mei, Jessica Qiu, and Mengying Yan. Vendor assistance, due diligence and tax structuring services were led by Bob Chen, Owen Huang, Vivian Wang and Eddie Yan.

Transaction details

Philips is an internationally renowned conglomerate in home appliances, electronics and health care with operations spanning over 60 countries, a household name with over 100 years of history of innovation, prestige and consumer trust. Philips Water Business Unit was established in 2012 to provide complete product portfolio and solutions for household water purification, and has developed into one of the leading brands in this area. Due to recent strategic re-alignment at group level, Philips has decided to divest its water purification business in Greater China.

Founded in 2011 and headquartered in Shunde Guangdong, Feiyu Group is a leading e-commerce company in China. Deerma, a fast-growing home appliance brand under Feiyu Group, has emerged as a comprehensive enterprise over the past six years with its own dedicated operations including R&D, production, and distribution.

The divestment represents a further step of Philips along its strategic shift towards a global leader in HealthTech. After the transaction, Feiyu Group will obtain Philips' global exclusive brand licensing on water purification business, thereby be able to expand its own brand and product portfolio, as well as to create brand synergy. It can also reinforce global presence by leveraging Philips' brand eminence, and contribute to the rapid growth of Philips products in global water purification market.

As the exclusive sell-side financial advisor for the transaction, CFA team has provided services including transaction structure design, preparation of deal documents, engaging with market/investors and collecting feedback, database maintenance and update, coordination of due diligence process and management interviews, developing negotiation tactics and providing negotiation support throughout the entire transaction.

The success of this transaction demonstrates not only our strong capabilities in transaction structure design, predicting transaction risks, developing effective negotiation tactics, controlling transaction process and offering insightful solutions within a tight timeframe, but also our professionalism in coordinating and managing working parties including client's internal functions and external investors' working teams throughout the transaction process.

Client satisfaction

Both parties speak highly of the role Deloitte has played in the deal and fully affirms our strong dedication, quick and effective responses, as well as in-depth understanding of their needs and challenges during the project. Once again, this successful milestone highlights our service excellence through cross-functional and cross-service line collaboration, and further enhances our experience and competitiveness in serving multi-national conglomerate clients. We are confident this project will empower us to explore more service opportunities with Philips and other MNCs in the foreseeable future.