Turkish company to acquire Dawlance for $258 million

Published: July 1, 2016
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The new product aims to cut down energy usage and is part of the company’s initiative of designing products that help conserve energy. PHOTO: FILE

The new product aims to cut down energy usage and is part of the company’s initiative of designing products that help conserve energy. PHOTO: FILE

KARACHI: Turkish company Arcelik has said it is going to acquire Dawlance, a privately held Pakistani manufacturer of consumer durables, for $258 million.

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The deal is likely to be closed by the end of 2016, as it requires approvals from competition authorities, purchase of minority stakes and transferring of land and buildings to the ownership of the company, it said.

When contacted by The Express Tribune, Dawlance General Manager for Sales and Marketing Hasan Jameel said he could neither confirm nor deny the deal.

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Dawlance manufactures white goods – which are consumer durables like refrigerators, freezers, air conditioners, microwave ovens and washing machines – in three factories and sells them in local and foreign markets.

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Financial accounts of Dawlance are not public because of its private-limited status. However, according to the earnings details Dawlance has provided to Arcelik, it had revenues of $220.6 million in 2015. Similarly, its (adjusted) earnings before interest, tax, depreciation and amortization (EBITDA) amounted to $45 million (roughly Rs4.5 billion) last year. Its net debt amounted to $30 million at the end of 2015, according to Deutsche Bank.

Reason for sale

Although Jameel refused to entertain any questions with regard to the sale of Dawlance, sources close to the sponsors of Dawlance say the company had been on the auction block for the last five years.

Majority shares of Dawlance are owned by Bashir Dawood. He is Hussain Dawood’s brother-in-law, a corporate titan who controls majority shareholdings in HUBCO, Engro and Dawood Hercules groups.

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Sources say the owner of Dawlance wanted to permanently move abroad. His children have established careers in fine arts and interior designing in Europe and the Middle East and apparently have little interest in managing the family business.

Market share

There are four major players in Pakistan’s white goods market, namely Dawlance, PEL, Haier and Orient. Waves and Kenwood are relatively smaller players, albeit with significant shares in some segments of the durables market.

The microwaves segment is completely dominated by Dawlance in Pakistan with the company controlling about 70% market share, according to market sources.

Dawlance is also the single largest player in the refrigerator segment with up to 45% market share.

In air conditioners, however, Haier owns the largest market share (40%). Dawlance is a relatively small player in this segment with about one-tenth of the market share.

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Dawlance boasts of having one of the widest dealers’ networks and after-sale networks in Pakistan. It has 37 branches in addition to 750-plus franchises across the country – a fact that distinguishes it from most of its competitors.

Web of companies

Dawlance operates through a complex web of subsidiaries in order to minimise its tax expense, inside sources say.

For example, a group company registered by the name of United Refrigeration Industries manufactures goods and then ‘sells’ to another subsidiary that either sells it onwards to local dealers or exports the durables.

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Similarly, another company of the group by the name of Dawlance Real Estate owns a number of properties that are eventually rented out to other companies of the Dawlance group.

These roundabout transactions within the group companies help save dealers in terms of taxes, sources say, thus leaving the dealers with wider profit margins to pocket.

 

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Reader Comments (9)

  • Seriously
    Jul 1, 2016 - 2:03PM

    Having a multi million dollar business like Dawlance and the kids move to the Middle East and do fine arts? What kind of contradiction is that?Recommend

  • Ramsey
    Jul 1, 2016 - 2:20PM

    Looks like they got a good deal. Why did they sell it so cheap?Recommend

  • fayez
    Jul 1, 2016 - 4:21PM

    Dawlance electronics are really good and durable. I am amazed after reading this news. I hope this is not true . Recommend

  • Junaid
    Jul 1, 2016 - 6:17PM

    ♫ Dawlance liya tou baat bani♬. Recommend

  • imran ali
    Jul 1, 2016 - 6:49PM

    @Seriously:
    no body is safe in Pakistan,,those who get opportunity move out to safer place Recommend

  • Sad News
    Jul 1, 2016 - 7:48PM

    Not a good news. I am a Pakistani Medical Professional living in US for the last 25 years, and I can remember only one good All Pakistani Brand company, Dawlance. Now Pakistan has a lost something big in its own local manufacturing. Next thing its new Turkish owner would do will be Re-name to Arcelik or whatever their name is, and it will not sound original. They may even move some of the factories back to Turkey or elsewhere. Engro Inc. also did a bad thing by selling another famous Pakistani Brand Indusrty to a Dutch firm. All other countries take pride in their Local Brands, but in Pakistan only personal self-interest rise above all. The Dawlance owner should at least have considered some other Local Pakistani partner or merge it with other Local Pakistani Brands and keep this brand in Pakistan and not sell it off to foreigners. Recommend

  • Fahim
    Jul 1, 2016 - 9:11PM

    Sorry for Bashir Dawood, Dawlance has durable products like LG, Panasonic but half the price.Recommend

  • Woz ahmed
    Jul 1, 2016 - 10:44PM

    Great news for the Dawlance owners, shame they will take the money abroad with them, but understandable.

    Am happy to see Turkey invest and not the Chinese.Recommend

  • musarrat fatima
    Sep 19, 2016 - 5:29AM

    I am happy to see Turki investment and not the China Please Give a cccccccccccccchnace to work with You for new Faranchise at ChishtianRecommend

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