Stockholm, Sweden — Electrolux has entered an agreement to buy GE Appliances for $3.3 billion.
The cash deal, Electrolux’s largest ever, could give the vendor a leading share of the U.S. majap market, as well a 48.4 percent stake in Mexican appliance manufacturer Mabe, a GE joint venture.
The acquisition is subject to U.S. regulatory approval but is expected to close next year.
Electolux said GE represents an “attractive strategic fit” in North America and provides “significant synergies” in sourcing and operations.
Electrolux president/CEO Keith McLoughlin described the acquisition as “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.”
He said GE’s product line complements his company’s iconic Frigidaire and Electrolux brands, and will enhance its presence in North America. The deal also “strengthens our commitment to the appliance business and … provides Electrolux with the scale and opportunity to accelerate our investments in innovation and global growth.”
The Swedish majap maker will also benefit from GE’s strong position within the U.S. homebuilder channel, which is currently enjoying greater growth than retail, and its vaunted distribution and fulfillment system.
GE chairman/CEO Jeff Immelt said, “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 U.S.”
GE put its appliance division back on the auction block earlier this year for the second time since 2008. Electrolux was considered a front-runner for the sale, although Quirky, a business incubation start-up with appliance and home-automation investments, was another rumored contender.
A buyout by Electrolux could give the Swedish manufacturer a leading share of the U.S. majap market and a reported $23 billion in total sales. According to TWICE market research partner The Stevenson Company, GE is roughly tied with Whirlpool brand for first place, with each controlling just over 15 percent of the market, while Electrolux’s largest U.S. brand, Frigidaire, trails Kenmore, LG, Samsung and Maytag for seventh place.
When Electrolux confirmed its discussions with GE last month, industry veteran Bill Trawick, outgoing president and executive director of the NATM Buying Corp., and a former merchant at P.C. Richard & Son and Conn’s, said the time is right for a sale, now that more appliance brands are competing for a smaller pie.
“At the industry’s peak there were three top brands,” he told TWICE. “Today there are five, competing for a lot less business.”
Trawick expected that GE would close the deal this time, and would likely do so within the next two months. “The appliance division is a small part of GE’s business and is a poor fit within its portfolio,” he said. “Jeff [Immelt] tried to make a go of it by spending a billion dollars on new laundry and French-door [refrigerator] manufacturing, but the market’s been soft and there’s been no return on his investment.”
Trawick said he could see the value for Electrolux in an acquisition, although the merit of the deal will hinge on the acquirer’s long-term access to the GE brand. He added that integrating the GE business into existing operations could prove challenging, based on the difficulties Whirlpool encountered following its acquisition of Maytag in 2006.
GE first put its Louisville, Ky.-based majap business up for grabs in 2008. At the time, the conglomerate was looking to sell, spin-off or form a joint venture for the division at an estimated price tag of up to $8 billion. Original contenders included LG Electronics, Turkish majap maker Arcelik, and GE’s Mexican production partner Controladora Mabe, although Haier became the leading acquisition candidate.
The Chinese manufacturer eventually backed out due to weakening U.S. market conditions and difficulty in securing financing. GE later added its lighting and distribution equipment businesses to the package, but eventually dropped its sale plans and instead invested $1 billion in the appliance division over three years in an effort to bring production back to the U.S. and update its plants and products.