TCL Electronics' bold HK$5.61 billion acquisition of TCL Air Conditioner has sparked heated discussions both within and outside the industry. What are Li Dongsheng's far-reaching intentions behind this move?

01. Li Dongsheng Makes a Grand Strategic Move

Chinese air conditioners have become global superstars this summer, especially among Europeans, who view them as a "lifesaver." Consequently, any significant developments in the air conditioning business of Chinese home appliance and tech giants have drawn considerable attention.

On the evening of July 16th, TCL Electronics announced its plan to acquire all shares of TCL AeroWell for HK$5.61 billion. TCL AeroWell indirectly holds 100% of the equity in Guangdong TCL Air Conditioner Holdings Co., Ltd., which in turn holds a 51% stake in TCL Air Conditioner (Zhongshan) Co., Ltd. (hereinafter referred to as "TCL Air Conditioner").

Upon completion of this transaction, TCL Electronics will indirectly acquire a 51% stake in TCL Air Conditioner, achieving a controlling merger of TCL's air conditioning business. In other words, it will gain control over TCL's air conditioning operations by holding a majority stake in the main entity, "TCL Air Conditioner."

The transaction will be paid for using a combination of "shares + cash," with approximately HK$5.443 billion to be paid through the issuance of about 360 million consideration shares at HK$15.12 per share, and the remaining approximately HK$167 million to be paid in cash.

Since both TCL Electronics and the controlling party of TCL's air conditioning business are subsidiaries of TCL Industrial Holdings, and the actual controllers of TCL Electronics and TCL Industrial Holdings are both Li Dongsheng, this transaction represents another capital operation by Li Dongsheng and constitutes a related-party transaction.

According to the announcement, TCL Electronics will acquire 100% of TCL AeroWell's equity from five entities: NXTHome, YF Rongye, Core Elite, Union Vast, and Reach Glory. Public information shows that TCL AeroWell previously acquired a 51% stake in TCL Air Conditioner from TCL Industrial Holdings through a transaction valued at approximately RMB 1.8 billion.

The five aforementioned entities are all closely linked to TCL. NXTHome is indirectly wholly owned by TCL Industrial Holdings, YF Rongye is wholly owned by Yuanfeng Capital (which has frequent asset management interactions with Li Dongsheng and TCL Industrial Holdings), and Core Elite and Union Vast are employee stock ownership platforms within the TCL Group. Reach Glory is also controlled by Li Dongsheng.

After TCL Electronics completes the HK$5.61 billion acquisition (approximately RMB 4.848 billion), it implies that the transaction in which TCL AeroWell bought the 51% stake for RMB 1.8 billion last year will yield a nearly 170% return. This means that Li Dongsheng, Yuanfeng Capital, and TCL Group employees will collectively benefit by nearly 170%.

The closing is expected to be completed in the fourth quarter of 2026. After the closing, TCL Industrial Holdings' system will hold a combined 51.51% stake, ensuring the stability of the listed company's control. Additionally, sufficient funds will be reserved to support global and high-end expansion.

Furthermore, the inclusion of air conditioning revenue and profits in the consolidated financial statements will also help TCL Electronics increase its revenue and profits. In the coming period, the global air conditioning market still offers significant development opportunities.

As Huachuang Securities stated, this acquisition will be a key milestone in TCL's full range of smart terminal layout (layout), establishing air conditioning as an important pillar of its product portfolio and facilitating its transition into a multi-category smart home platform.

02. TCL Electronics Targets the White Goods Market

According to industry forecasts, the global HVAC market is expected to grow from US$564.8 billion in 2026 to US$1.2 trillion in 2035, with a CAGR of 8.1%. Coupled with the increasing frequency of extreme global heatwaves and the relatively low air conditioning penetration rates in emerging markets such as Southeast Asia, Latin America, and Africa, these factors represent future growth opportunities for brands like TCL.

Public information shows that TCL's air conditioning business includes the research, development, production, and sales of residential air conditioners, commercial air conditioners, portable air conditioners, and related products.

In 2025, TCL Air Conditioner's total sales exceeded 22 million units, ranking fourth globally, with exports accounting for 76% of the total. Its domestic brand export volume ranked among the top two, and it has over 10 production bases worldwide with an annual production capacity exceeding 38 million units.

In 2025, TCL Air Conditioner's revenue reached approximately HK$33.8 billion, up 16% year-on-year, with a net profit exceeding HK$1.9 billion, up about 40% year-on-year. In the first quarter of this year, its net profit was HK$300 million.

Before acquiring TCL AeroWell, TCL Electronics primarily focused on black goods (consumer electronics), while air conditioners and other white goods were only distributed on a consignment basis. After the acquisition, TCL Electronics will deploy a full-chain layout (layout) in the white goods business, starting from the research and development phase. This allows it to share existing R&D technological achievements in AI and IoT, reduce duplicate R&D expenses, and enhance its bargaining power over raw material suppliers in the supply chain to lower material procurement costs.

In particular, TCL Electronics has already established offline stores and online channels in over 100 countries and regions worldwide. This means that TCL air conditioners and other white goods can accelerate their overseas sales volume and seamlessly integrate with its core smart TV business in black goods to form intelligent air living solutions, enhancing the narrative support for its territorial expansion.

In the black goods segment, TCL has firmly established its brand moat. In the first quarter of this year, data from authoritative market research firm TrendForce showed that TCL TV shipments reached 7.68 million units, ranking second globally after Samsung and ahead of home appliance giants such as Hisense, LG, and Xiaomi.

On January 20th of this year, TCL Electronics reached an agreement with Sony to establish a joint venture, with TCL Electronics holding a 51% stake. The joint venture will acquire the Sony and BRAVIATM brands and conduct integrated R&D, manufacturing, and other businesses for products including TVs and home audio systems worldwide.

This move signifies a phenomenal enhancement of TCL Electronics' voice and brand influence in the global TV industry and supply chain. It will also grant exclusive access to core advanced technology licenses, such as Sony's XR cognitive chip technology, widely regarded as the strongest in the TV industry, as well as its audio-visual quality algorithms and tuning experience.

In 2025, large-size TVs accounted for 56.5% of the company's revenue, with international market large-size TV revenue accounting for 41.5%, becoming the core engine for TV business growth. If the integration with Sony's TV business is completed smoothly, starting this year, the TV business's contribution to revenue will have significant room for imagination.

TCL Electronics has a solid foundation. The latest performance forecast shows that in the first half of this year, the company expects to achieve revenue of HK$60.3-65.7 billion, up 10%-20% year-on-year, with adjusted net profit attributable to shareholders ranging between HK$1.48-1.65 billion, up about 40%-56% year-on-year.

TCL Electronics has been a popular contender in previous editions of the Hong Kong-listed companies' "Top 100 Hong Kong Stocks" selection. At the 2025 Hong Kong Wealth Management Summit and the 12th "Top 100 Hong Kong Stocks" awards ceremony, the company won two awards: "Excellent Hong Kong Stocks Connect Company of the Year" and "Top 50 Medium-sized Enterprises."

This acquisition of TCL's air conditioning business will also complete an important piece of TCL Electronics' puzzle in deploying a full range of smart terminal businesses, thereby enhancing the company's overall competitiveness and ultimately improving its performance. There is a high probability that TCL Electronics will once again be selected for the 13th "Top 100 Hong Kong Stocks."

Undoubtedly, Li Dongsheng has made another brilliant move!

References:

Cover image source: TCL

TCL "Marries" Sony: Will Samsung TV Face Its Biggest Rival? - Internet Buzz

TCL Electronics Plans to Acquire 51% Stake in TCL Air Conditioner for HK$5.61 Billion - IT Home

Hong Kong Stocks Move: TCL Electronics Surges Over 5% After Announcing Plans to Acquire All Shares of TCL AeroWell (Cayman), Establishing Air Conditioning as a Key Pillar of Its Product Portfolio - Zhitong Finance

"Top 100 Perspective": Why Did TCL Electronics (01070.HK) Plunge After Announcing a HK$5.61 Billion Acquisition of Its Air Conditioning Business? - Hong Kong Financial News

TCL Electronics Spends HK$5.6 Billion on Its Own Air Conditioners: Li Dongsheng Teams Up with Yuanfeng Capital for a 170% Return - Damo Finance Pro