GE Appliances has called it quits on its planned acquisition by Electrolux amid staunch buyout blowback from federal regulators.
In a terse statement this morning, GE said it has terminated the $3.3 billion agreement as a federal anti-trust suit was playing out in court, and “will now pursue other options to sell its appliances business.”
The unit, which has been on and off the selling block for nearly a decade, “is performing well, and GE will continue to run the business while it pursues a sale,” the conglomerate said.
GE used its right of refusal to nix the deal after 15 months of negotiations, the Wall Street Journal reported. GE said it will also pursue a $175 million break-up fee from Electrolux.
Electrolux said it “regrets that GE has terminated the agreement while the court procedure is still pending.”
GE’s decision was likely influenced by the Department of Justice’s (DOJ’s) adamant opposition to the merger, which led to an anti-trust court battle with Electrolux. The agency has also refused to accept any of the company’s proffered concessions.
“Electrolux has made extensive efforts to obtain regulatory approvals,” the Swedish majap maker said in a statement, and “considers that the settlement proposals that were offered to DOJ were reasonable and would have addressed DOJ’s competition concerns.
“Unfortunately, these proposals were rejected by DOJ.”
The Justice Department was chiefly concerned with GE’s strength in the homebuilder channel and both manufacturers’ dominant market share within the cooking category, fearing that a merger would create a duopoly within the commercial oven sector.
Electrolux, which is the world’s second-largest appliance manufacturer by sales volume, had argued unsuccessfully that Asian and European vendors like Samsung, LG, Haier and Arcelik/Blomberg are fueling intense competition in the U.S. market, and that the DOJ is misreading the global appliance industry and based its suit on faulty analysis.
GE’s withdrawal dashes the immediate hopes of Electrolux president/CEO Keith McLoughlin, who was counting on the deal to give his company parity with No. 1 majap maker Whirlpool.
“Although we are disappointed that the acquisition will not be completed, Electrolux is confident that the group has strong capabilities to continue to grow and develop its position as a global appliances manufacturer," McLoughlin said in a statement.
“The strategy to grow profitably in promising segments, product categories and emerging markets remains,” he continued. “The group’s operations in North America have [proven] to be strong on [their] own merits, with good organic growth and a recovery in earnings during 2015.”
He added that the company’s North American appliance unit “has a strong presence in the U.S. under the brands Frigidaire and Electrolux, and we are confident that this position will be maintained and strengthened.”