CPE Acquires Majority Stake in A. O. Smith’s China Business, Company Retains 19%
Key Facts
A. O. Smith announced on October 27 that CPE had acquired a majority stake in the company’s China business, while A. O. Smith will retain a 19% stake and a long-term license for its brand, according to the headline of the company statement published via PR Newswire. The available information did not include the deal value or closing terms. The new arrangement gives CPE a controlling stake, while A. O. Smith remains a minority partner and its brand retains a long-term license in the Chinese market. The announcement came after the company began reviewing strategic options for its China business in 2025. In its quarterly filing issued in July, it said the review included strategic partnerships and other alternatives, and was still under way at the time.
The deal followed a period of weakening activity in the company’s China business. A. O. Smith’s third-party sales in China fell 28% in local currency in the second quarter of 2026. The company attributed the decline to continued challenging market conditions, including the end of government support programs for home appliances. Across its Rest of World segment, sales were $194.9 million in the same quarter, down 19%, which the company said reflected continued weakness in China’s consumer appliance market. A. O. Smith expected its third-party sales in China to decline by a low double-digit percentage in local currency in 2026 compared with 2025, citing uncertainty about the timing of a business recovery.
The business restructuring came as the company’s quarterly results showed pressure on some financial metrics. Consolidated sales were $1,004.3 million in the second quarter of 2026, down 1% year over year. Net earnings fell 18% to $124.9 million, while diluted earnings per share declined 15% to $0.91. These figures show the company’s overall performance in the quarter, alongside the steeper decline in China sales. The available deal announcement did not specify its financial impact or how it would be recorded in the company’s results.
China’s economic indicators point to continued overall growth alongside weakness in some components of activity. Gross domestic product grew 4.5% year over year in the third quarter of 2026, compared with 4.3% in the second quarter, and growth reached 4.6% in the first three quarters. Mao Shengyong, deputy head of the National Bureau of Statistics, said the economy added 5.7 trillion yuan in output during the period, the largest increase for the same period in five years. The bureau said growth in the first three quarters was in line with the annual growth target, while China’s leadership set its 2026 target at 4.5% to 5%. The International Monetary Fund cut its forecast for China’s 2026 growth to 4.5% in October.
Foreign investment indicators showed inflows into China rose 2.5% year over year in September, according to the State Council Information Office, citing Commerce Ministry data. In the first nine months of 2026, utilized foreign investment in high-tech industries climbed 33.8% and accounted for 41.6% of the national total, an increase of 11.9 percentage points from the same period a year earlier. The data highlight differing investment trends across sectors, while A. O. Smith’s disclosure focused on declining sales in China’s consumer appliance market. The company did not link its deal announcement to foreign investment indicators or macroeconomic data.
September activity data showed the official manufacturing purchasing managers’ index returned to expansion territory, reaching 50.1 points, up 0.3 points from August. The non-manufacturing business activity index rose to 50.2 points, up 1.2 points. But manufacturing components painted a weaker picture: the new orders index was 50.5 points, down 0.1 points from the previous month, and the employment index fell to 48.4 points, down 0.3 points. The readings show improvement in the two headline indexes, while orders and employment remained under pressure in the same month. A. O. Smith is scheduled to report third-quarter results before the market opens on October 29, followed by an investor call at 10:00 a.m. Eastern time.
A. O. Smith shares closed at $62.06 on October 27, compared with $61.91 at the previous session’s close, according to EL7 data. The closing price shows the stock’s move on the day before the scheduled third-quarter results, while the available data do not provide a later real-time price. Bloomberg reported in April that CPE and PAG were among parties considering an investment in a majority stake in the company’s China business, alongside Hisense, and that potential bids could reach hundreds of millions of dollars. That remains an earlier report of possible interest, not a disclosure of the value of the deal announced later.