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Chinese sofa conglomerate Man Wah Holdings, the group that houses the Cheers upholstery brand, has confirmed that it has signed a proposed deal that will form a strategic alliance with Home Group Ltd to strengthen its position in Europe.

Man Wah Holdings signed a memorandum of understanding (MOU) with Home Group Ltd on 16 November 2016, which will see Man Wah gain access to Home Group’s existing production bases in Europe, as well as its sales networks, with Man Wah becoming a 50% shareholder of Home Group.

Man Wah said that, under terms of the ‘not legally binding MOU’, it will invest more than €50.6m over the next three years into Home Group, which sells furniture to the Steinhoff Group and IKEA.

The deal will allow Man Wah to expand its European presence and will launch a European collection of value products to boost sales in the continent, whilst also offering Home Group opportunities to expand within China using Man Wah’s resources and facilities.

Man Wah Group and Home Group are currently negotiating terms of the formal agreements in connection with establishing this strategic alliance, with the MOU possibly not leading to a result of signing a formal agreement, which could potentially impact the joint venture proceeding.

Within the announcement, Man Wah said: “The Company believes that there are a lot of synergies between the Man Wah Group and the Home Group in product development, sourcing and manufacturing. This strategic alliance is expected to be mutually beneficial.”