Electrolux has confirmed that it is to buy GE Appliances for a cash consideration of $3.3 billion (£2bn).
In a statement issued by Electrolux, the company said that the fit between Electrolux and GE Appliances would create a strong platform for growth in the North American appliance market and enable the combined business to better serve North American consumers.
Commenting on the deal, Electrolux president and chief executive Keith McLoughlin said: “This is an historic moment and important strategic move for the Electrolux Group, which takes our company to a new level in terms of global reach and market coverage. GE’s premium, high-quality appliances complement our own iconic brands and will enhance our presence in North America.
“The acquisition, which is our largest ever, 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.”
GE chairman and chief executive Jeff Immelt added: “Electrolux is the right global business for our customers, consumers and employees. GE Appliances’ people, valuable home appliances brand, products, distribution, and service capabilities make it a perfect fit with Electrolux and its goal of accelerating growth in the US.”
Subject to regulatory approvals, the deal is expected to be be finalised during 2015. A rights issue [whereby existing shareholders will be able to purchase additional new shares in the company] corresponding to around 25 per cent of the consideration is planned following completion.
The acquisition will also include a 48 per cent share in Mexican appliance company Mabe, with which GE has operated a joint venture for the past 30 years. Mabe manufactures some of the GE product line-up.
In 2013, GE Appliances had sales of $5.7bn and profits (EBITDA) of £900m. Combined 2013 sales for GE and Electrolux were $22.5bn with profits (EBITDA) of $1.5bn. GE Appliances generates more than 90 per cent of its revenue in North America. It has its own distribution and logistics network and has nine factories with 12,000 employees.
Said Mr McLoughlin: “GE Appliances is a well-run operation with strong capabilities in key areas such as R&D, engineering, supply chain and customer service, and we look forward to joining forces with their team of talented and competent people.”
The acquisition is expected to products annual cost savings of around $300m. One-off costs of implementation and expenditure for the acquisition are expected to amount to around $370m.
Talking to ERT earlier this year about the possibility of a merger (see her blog), Euromonitor appliances analyst Cristina Baus said: “Electrolux has a wide geographical footprint that could serve to leverage the expansion of the GE brand, while at the same time gaining a stronger foothold in the US through GE’s strong domestic brand recognition.
“The US market represented 13 per cent of volume sales for Electrolux in 2013, and together with Latin America and eastern Europe, helped to offset the losses in its home market, western Europe. In the first six months of 2014, however, Electrolux reports sales remained unchanged in North America, despite a spike in the market.
“Acquiring GE would help Electrolux become the number one player in major appliances in the US, overtaking Whirlpool. Electrolux would also benefit from the $1 billion investment GE did in its US production plants, particularly in home laundry appliances, where GE has a definite upper hand over Electrolux.”