Spectrum Brands – Making the most of Getting Relocated in China The Deal

the assignment

Active engagement and an understanding of relevant regulations help prevent being taken advantage of in government mandated relocations in China

  • Hardware & Home Improvement (HHI) is a division of Spectrum Brands Holdings, Inc. (NYSE: SPB). Spectrum Brands is a global, diversified consumer products company and a leading supplier of consumer batteries, residential locksets, residential builders’ hardware and faucets, shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn and garden and home pest control products, and personal insect repellents.
  • In 2013, HHI was requested by the government to move its factory in Zhongshan city, Guangdong province to an industrial park. Tractus was retained by HHI to negotiate compensation with the local government and the designated real estate developers in its new location to ensure the efficient relocation of the facility and a process that was fully compliant with government regulations.

Tractus’ Solution

Industry expertise and prior project experience leads to successful negotiations

  • Tractus conducted a benchmark study of the local real estate market, and evaluated the financial proposal offered by the economic development zone (EDZ) developer and local government for its existing property.
  • We analyzed the different legal options available to HHI including accepting a government-mandated (eminent domain) relocation and restitution; a government buy-back, and a straight forward commercial transaction, in terms of regulatory compliance, taxes and fees, and the impact on operations.
  • In parallel, Tractus assisted the client to negotiate with another developer on a build-to-suit and lease for its future operation in the designated industrial park.
  • Using our experience and expertise in construction and real estate development, Tractus provided support during the negotiations relating to: construction specifications, timeline, rental rates and the interpretations of legal and regulatory terms.

Result

Assisted HHI to successfully sell its existing property in a tax-efficient way

  • Despite the usual unexpected difficulties including, changes in local government policy and the counterparties’ leadership, we assisted HHI to successfully sell its existing property to a developer designated by local government.
  • Tractus evaluated the transaction structuring to ensure it was being undertaken in a tax efficient manner.
  • The build-to-suit lease contract was also signed with another developer in a nearby industrial estate in parallel ensuring that HHI would have a facility ready for occupancy by the time it was required to vacate its existing facility.

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