GE terminates Electrolux transaction


Financier Worldwide Magazine

February 2016 Issue

February 2016 Issue

More than one year after agreeing to a $3.3bn deal which would have seen its appliances business sold to the Swedish appliance giant Electrolux AB, General Electric (GE) bosses have terminated the agreement following a US Department of Justice (DoJ) antitrust lawsuit.

Controversial from the outset, the DoJ lawsuit (in July 2015) raised concerns that the proposed merger could lead to price increases with the combined businesses monopolising the sale of kitchen appliances to customers, including hotels, home builders and property managers.

In response, GE had said that competition would not suffer and that it would defend the merger, adding that the company aimed to close the deal by the end of 2015.

The GE/Electrolux transaction was “bad for the millions of consumers who buy cooking appliances every year”, said Justice Department lawyer David Gelf who added that “Electrolux and General Electric could not overcome that reality at trial”.

GE bosses have admitted that they had indeed been put under considerable pressure by the DoJ and, as a result, had decided to go in a different direction regarding the sale of its Louisville-based appliances business, resulting in the firm walking away in the midst of a trial which had been running since November.

Chip Blankenship, GE’s president and chief executive, said: “GE now will pursue other options to sell the business, with the goal of continuing to improve GE Appliances’ competitiveness in the industry and our ability to provide the products and services consumers have counted on for more than a century.”

Mr Blankenship added that GE Appliances would continue to be operated without interruption and customers could count on continued access to innovative and high-quality GE-branded appliances, as well as the fulfilment of all GE service and warranty obligations.

In the wake of the GE announcement, the Stockholm exchange saw Electrolux shares fall 11.92 percent to $210.50 per share. “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,” said Keith McLoughlin, president and CEO of Electrolux.

“The strategy to grow profitably in promising segments, product categories and emerging markets remains. The Group’s operations in North America have proved to be strong on its own merits, with good organic growth and a recovery in earnings during 2015. Major Appliances North America has a strong presence in the US under the brands Frigidaire and Electrolux, and we are confident that this position will be maintained and strengthened.”

For Louisville, GE’s decision has led to uncertainty as to the future of the firm’s appliances division, which employs around 6000 people – especially in light of the company’s two previous attempts to sell this component of its overall business.

Keen to allay any fears and looking to reassure residents that GE’s Appliances business in the city would continue without interruption, Mayor Greg Fischer said: “GE Appliances has been, and will continue to be, a great business and integral part of the Louisville community. I have immense confidence that the team will continue to innovate, produce, and sell at the world class levels under the iconic GE brand. As GE explores new opportunities, the city of Louisville will do its part to help grow the workforce and maintain the GE Appliances headquarters here in Louisville.”

Having received a $175m break-up fee from Electrolux, agreed with the Swedish-owned firm in the event that the deal fell through, GE has stated that its appliances division is performing well and will continue to be run while a sale is pursued.

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Fraser Tennant

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