Guangdong Midea Electric Appliance has finally decided to sell its, loss-making small home appliance subsidiary to its largest shareholder Midea Group.

The proposal was approved at its provisional meeting of shareholders on Monday, the Shenzhen-listed company said in a statement yesterday.

The company will transfer its 85 per cent stake in Foshan Daily Appliance to Midea Group for more than 248 million yuan (US$30 million).

The deal has attracted a lot of attention and sparked disputes for more than a month.

Since the initial share transfer agreement was signed on May 19, Midea's major rival Glanz has doubted shares would be sold cheaply, and had offered higher prices. However, Midea refused to sell its small appliance business to an outside interest.

"The share transfer is an important part of the business reorganization for Midea Group," the company said in a previous statement.

The deal aims to further clarify the business division between the listed company and the group, improve corporate governance and reduce affiliated trading, it said.

"Peeling off the small appliance business is beneficial for the listed company," said Chen Yuanwang, an industry analyst at China Securities.

China's fledgling appliance industry is still growing, leaving Foshan with long-term losses.

Using 2004 figures, the sale will cut turnover by 5.8 billion yuan (US$700 million), while total profit would increase by 90 million yuan (US$10.9 million).

Funds raised through the share transfer will be invested in its core and profitable air conditioner and compressor businesses, to further strengthen competitiveness, Midea Electric Appliance stated.

But the group will not give up the small home appliance business, which is still said to have growth potential.