---
title: A. O. Smith Is Selling Most of Its China Business After Sales There Fell by a Quarter
description: A. O. Smith is selling 81% of its China business to CPE at a $400 million valuation, after its China sales fell about a quarter between 2021 and 2025.
author: Darie Nani (Editor-in-Chief)
date: 2026-10-28T10:10:47.953Z
updated: 2026-10-28T10:10:47.970Z
canonical: https://www.sovereignmagazine.com/article/a-o-smith-china-business-sale
image: https://cdn.nanimediahouse.com/pexels-dazzling-night-view-of-shanghai-s-pudong-skyline-with-the-ic-37011820.jpg
categories: Markets
content_type: News
region: China
publication: Sovereign Magazine
schema_type: Article
---

A. O. Smith, the American maker of water heaters and water treatment systems, agreed on 27 October 2026 to sell 81% of its China business to CPE, a Chinese alternative asset manager, in a deal that values the business at about $400 million on a cash-free, debt-free basis. China, where A. O. Smith has operated for 30 years, accounted for about 18% of its sales in 2025, down from about 22% in 2023.

A. O. Smith will license its brand to the business under a long-term agreement and collect royalties. Counting the present value of those royalties, the company said the total value of the deal should exceed $500 million. It expects the sale to close in the first half of 2027, subject to regulatory approvals.

A. O. Smith announced a review of options for the China business in July 2025. Bloomberg reported in April 2026 that CPE and PAG were among the interested investors, at a few hundred million dollars for a majority stake. Steve Shafer, A. O. Smith's chairman and chief executive, thanked the China team for its work, "particularly in a challenging market."

## A. O. Smith's China Sales Fell by a Quarter Between 2021 and 2025

Sales in China fell from $922.4 million in 2021 to $835.1 million in 2023, $791.9 million in 2024 and $689.5 million in 2025, according to the company's annual reports. In local currency, sales rose 4% in 2023 and fell 12% in 2025, which the company blamed on weak consumer demand and the end of government subsidies for appliance purchases in the second half of that year.

Sales in China dropped 28% in local currency in the second quarter of 2026, and A. O. Smith expects a full-year decline in the low double digits. Its Rest of World segment, most of which is China, earned $10.2 million in that quarter, down from $25.3 million a year earlier. A. O. Smith is due to report third-quarter results on 29 October 2026.

In China, A. O. Smith sells residential water heaters, reverse-osmosis water purifiers and kitchen appliances such as range hoods, cooktops and dishwashers through about 8,700 points of sale. Premium products make up a large share of those sales, and its competitors include Haier's Casarte and Midea's COLMO brands. In its annual report the company warned that weaker consumer confidence and more competition from Chinese companies could lead shoppers to delay purchases or buy cheaper products.

## A. O. Smith Has Given No Growth Target for Its China Business, Unlike Starbucks and Burger King

Starbucks agreed in November 2025 to sell up to 60% of its China retail operations to Boyu Capital, keeping 40% and [licensing the Starbucks brand to the new company](https://investor.starbucks.com/news/financial-releases/news-details/2025/Starbucks-and-Boyu-Announce-Joint-Venture-for-the-Next-Chapter-of-Growth-in-China/default.aspx). Boyu's stake was priced on an enterprise value of about $4 billion, and Starbucks put the total value of its China business at more than $13 billion once its retained stake and licensing income are counted. The partners aim to grow from 8,000 coffee shops to as many as 20,000.

A week later, Restaurant Brands International, Burger King's parent, agreed to a joint venture in which CPE [puts $350 million of new capital into Burger King China](https://www.rbi.com/English/news/news-details/2025/RBI-and-CPE-Announce-Joint-Venture-to-Reignite-Growth-at-Burger-King-in-China/default.aspx), taking about 83% and leaving RBI with about 17% and a board seat. That money goes into the business, to take it from about 1,250 restaurants to more than 4,000 by 2035.

The closest match to A. O. Smith's deal is McDonald's, which in 2017 sold 80% of its mainland China and Hong Kong business to Citic and Carlyle in a deal worth $2.08 billion, kept 20% and gave the buyers franchise rights for 20 years. A. O. Smith's deal, at a total value of more than $500 million, is a fraction of Starbucks' $13 billion, and unlike Burger King's, the money from CPE goes to A. O. Smith rather than into the business. The $400 million valuation works out to about 58 cents for every dollar of A. O. Smith's 2025 sales in China. CPE said it would keep investing in product development, service and customer relationships, but neither CPE nor A. O. Smith has given a sales or store target for the business.

A. O. Smith plans to use its after-tax proceeds, along with about $80 million in cash it will be able to bring home from China, mainly to buy back its own shares once the sale closes.

## FAQ

**Q: Is A. O. Smith profitable?**
Yes. A. O. Smith earned $546.2 million on total net sales of $3.83 billion in 2025, up from net earnings of $533.6 million on $3.82 billion in 2024.

**Q: Who owns A. O. Smith Corporation?**
A. O. Smith's common stock trades on the New York Stock Exchange under the ticker AOS. A Smith family voting trust holds about 67.8% of the total voting power through Class A shares, which carry one vote each, while common shares carry one-tenth of a vote.

**Q: Where does most of A. O. Smith's business come from?**
North America made up about 78% of A. O. Smith's sales in 2025. In January 2026 the company bought Leonard Valve, a maker of water temperature and flow controls, for $470 million, and it expects that business to add about $70 million of North American sales in 2026.

**Q: How big is CPE?**
CPE says its core investment team has completed more than 300 investments and manages funds in dollars and renminbi with total assets of more than RMB 150 billion, across sectors including advanced manufacturing, consumer, healthcare and infrastructure.