Home >companies >Electrolux to buy GE’s appliances division for $3.3 billion

New York/Stockholm: Electrolux AB agreed to buy General Electric Co.’s (GE’s) home-appliances unit for $3.3 billion in cash, adding brands such as Hotpoint and GE Monogram with its biggest acquisition.

The Swedish company plans a rights offering to fund about 25% of the purchase, it said on Monday in a statement, adding that the deal will be accretive to earnings per share from the first year. Electrolux will continue using the GE Appliances brand under a “multi-decade agreement," GE spokesman Seth Martin said.

The acquisition will boost Electrolux’s presence in the US, its largest market, as the Stockholm-based company tries to reverse several years of stagnant sales. Both Electrolux and GE trail Whirlpool Corp., the largest US appliance company.

The purchase “strengthens our commitment to the appliance business and also provides Electrolux with the scale and opportunity to accelerate our investments in innovation and global growth," Electrolux chief executive officer Keith McLoughlin said in the statement.

Electrolux rose 7% to 200.6 kronor as of 9am in Stockholm trading.

The appliances unit helped make GE a household name with American consumers after introducing its first toaster in 1905. The sale, which follows an unsuccessful attempt to divest the business in 2008, furthers GE CEO Jeffrey Immelt’s effort to reshape the company around its high-margin industrial units.

“This transaction is consistent with our strategy to be the world’s best infrastructure and technology company," Immelt said in the statement. “We are creating a new type of industrial company, one with a balanced, competitively positioned portfolio of infrastructure businesses with strong advantages in technology, growth markets, driving customer outcomes and a culture of simplification."

Appliance park

The deal will generate an after-tax gain of 5 to 7 cents per share at closing, according to GE, which has invested $1 billion in the Louisville, Kentucky-based appliances division since the global financial crisis.

The unit, which employs about 12,000 people, had sales of $5.7 billion last year, or 4% of GE’s total revenue, according to the company. About half of the employees work at the 900-acre headquarters campus, known as Appliance Park.

Electrolux, the maker of Frigidaire refrigerators and AEG stoves, said the deal will enhance its presence in North America, where the asset generates more than 90% of revenue, and generate savings in both sourcing and operations.

Electrolux, which has its North American headquarters in Charlotte, North Carolina, generated sales of 31.9 billion kronor ($4.5 billion) across the continent last year, almost 30% of its global revenue. The company said in July that it expects US sales to grow 4% this year.

Takeover talks

Electrolux and Quirky Inc., a New York-based start-up specializing in crowd-sourced product development, emerged as potential purchasers for GE’s appliances business last month, when Bloomberg News reported that talks were under way with GE. While GE later said it was negotiating with “Electrolux and other interested parties," Quirky never confirmed its involvement.

Quirky, which had been considering a bid in partnership with private-equity investors, dropped out of the talks late last month, a person familiar with the matter has said.

Electrolux said most of the purchase will be funded by a committed bridge facility arranged by Deutsche Bank AG and SEB AB, which will gradually be replaced by capital market and bank financing. Bloomberg

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