Electrolux has agreed to buy the century-old appliances unit of General Electric (GE) for $3.3 billion (R35.3bn) in cash, putting the Swedish company on a par with industry leader Whirlpool of the US.
The purchase, Electrolux’s biggest, brings together brands such as Hotpoint, Frigidaire and Zanussi, and creates a company with annual revenue of about $22.5bn.
Acquiring the predominantly US business would add to earnings from the first year, Stockholm-based Electrolux said yesterday, sending its shares soaring to their highest price since at least 1989.
Electrolux and Whirlpool would dominate the North American appliance market, Johan Eliason, an analyst at Kepler Cheuvreux, said.
Each company would control about 40 percent of the industry in the region, he said in a note. For GE, the sale helped meet a long-held ambition to focus on more profitable industrial units such as aviation, and oil and gas.
The deal made Electrolux “a major player that can take advantage of synergies”, David Jacobsson Cederberg, an analyst at Pareto Securities, said. The Swedish company forecast annual cost benefits of about $300 million.
Electrolux shares rose as much as 9.3 percent to 205 kronor (R308) and were at 198.5 kronor at 1.33pm in Stockholm. Acquisition multiples of 0.58 times sales and 8.5 times earnings before interest, tax, depreciation and amortisation were “attractive”, Eliason wrote.
GE traded at $26.06 at that time in Frankfurt, little changed from its previous closing price in New York of $26.10.
Electrolux said the deal was subject to regulatory approval. Given the significant boost to the company’s US market position, that was not a given, according to Swedbank analysts.
“We do not fully neglect the risk of a declined approval,” the analysts wrote in a note.
The GE unit, which employs about 12 000 people, had sales of $5.7bn last year, or 4 percent of GE’s total revenue, according to the company. The unit generates more than 90 percent of its revenue in North America.
Electrolux, which has its North American headquarters in Charlotte, North Carolina, generated sales of 31.9 billion kronor across the continent last year, almost 30 percent of its global revenue.
Electrolux said it would continue using the GE Appliances brand under a 40-year agreement. – Bloomberg