Hillhouse Capital has reduced its stake in Gree Electric Appliances, Inc. of Zhuhai after six years as a major shareholder, drawing market attention. The move raises questions about the rationale behind the divestment and the underlying implications.
On the evening of February 25, Gree Electric announced that its largest shareholder, Zhuhai Mingjun Investment Partnership, plans to sell up to 112 million shares, representing no more than 2% of the company’s total equity excluding repurchased shares. Hillhouse Capital became Gree’s largest shareholder in late 2019 through Zhuhai Mingjun, investing 41.662 billion yuan in the mixed-ownership reform. Currently, Zhuhai Mingjun holds approximately 902 million shares, or 16.11% of Gree’s total equity. The shares to be sold were originally acquired from Gree Group on January 23, 2020. The减持 window will open 15 trading days after the announcement and last for three months, with the selling price determined by market conditions.
Why has Hillhouse decided to减持 after six years of involvement? What factors may have influenced this decision?
An examination of Gree’s performance over this period reveals challenges in its core business. In 2019, Gree and Midea Group were often compared as leading home appliance manufacturers in the A-share market. At the end of 2019, Midea’s market capitalization was 404.2 billion yuan, while Gree’s was 394.5 billion yuan, indicating a relatively small gap. However, as of March 5, 2026, Gree’s market value had fallen to 207.5 billion yuan, a decline of nearly 47% from the end of 2019. In contrast, Midea’s market capitalization rose to 579.1 billion yuan, an increase of over 43% during the same period.
Revenue trends also highlight the divergence between the two companies. Gree’s revenue decreased from 200 billion yuan in 2019 to 190 billion yuan in 2024, while Midea’s revenue grew from 279.3 billion yuan to 409 billion yuan over the same period.
Midea appears to have achieved greater success in diversification. According to its 2024 annual report, Midea generated 409.084 billion yuan in revenue, with commercial and industrial solutions contributing over 100 billion yuan, accounting for 25.5% of total revenue and serving as a secondary growth driver. In contrast, Gree remains heavily reliant on air conditioners and other consumer appliances, which represent about 80% of its revenue. Combined revenue from industrial products, green energy, and smart equipment accounts for less than 10%.
More concerning is the apparent erosion of Gree’s dominance in the air conditioning market, which has long been its core business. In the first half of 2025, Gree’s consumer appliance segment, which includes air conditioners, reported revenue of 76.279 billion yuan, representing 78.38% of total revenue. According to a 2019 report, Gree held a 30.87% share of the domestic household air conditioner market, while Midea held 28.22%, maintaining Gree’s leading position.
However, by 2025, Gree’s top position showed signs of weakening. Data from Euromonitor International indicated that Midea reclaimed the top global spot in air conditioner sales in 2025. In 2024, Midea captured 27.5% of the global market, equivalent to one in every four air conditioners sold worldwide. Gree’s 2024 annual report, however, stated that it remained the market leader in air conditioner sales.
According to AVC data from July 2025, Midea led in overall air conditioner sales with a 29% market share, followed by Gree with 17%. The growth of smart home appliances has attracted new competitors, such as Xiaomi, which has entered the air conditioner market with affordable smart models, intensifying competition. Online sales data from July 2025 showed Midea with 19.98%, Gree with 16.41%, and Xiaomi with 13.50%, indicating that Xiaomi is closing the gap with Gree in the online segment.
What prompted Hillhouse’s decision to减持? On March 2, Gree stated that the move was part of normal fund operations, with proceeds used to repay maturing bank loans related to the acquisition. The减持 is not expected to affect the company’s governance or operations.
It is worth noting that Hillhouse used significant leverage in the 2019 acquisition, with approximately 21.85 billion yuan in自有资金 and 20.83 billion yuan in bank loans. In 2021, Zhuhai Mingjun refinanced the original loans with a new 20.8 billion yuan facility from banks including Agricultural Bank of China, Bank of Communications, and Ping An Bank, with a term of up to 72 months.
Between 2020 and 2025, Gree maintained high dividend payments, distributing approximately 16.5 yuan per share in cumulative dividends. Based on its 902 million shares, Hillhouse likely received around 15 billion yuan in dividends over six years. However, Gree’s share price has declined since August of last year, and the减持 announcement has added further pressure.
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