Electrolux, the Swedish maker of washing machines, dish washers and other household goods is buying General Electric's appliance business for $3.3bn, increasing its presence in the US and narrowing the gap with Whirlpool, the market leader.
It's a big deal for the Swedish company – in fact the biggest deal it's ever made – and its shares jumped around 8% in early trading in Stockholm following the news.
Electrolux markets under the Zanussi and AEG brands, as well as its own, and with this deal will find itself suddenly among the cream of US appliance manufacturers. This is as handy – sales of white goods in Europe, until now its principle market, have wound up under a dirty black cloud of late. The US will now become Electrolux's largest market instead.
The company spent more than analysts had anticipated – the deal was expected to be in the $2-$2.5bn mark – but Electrolux still seemed happy: GE Appliances made $5.7bn in sales last year, and Electrolux put the price at about seven times this year’s ebitda. Electrolux will also pick up GE's 48% stake in Mabe, a Mexican appliances company. Electrolux CEO Keith McLoughlin described the whole thing as an 'attractive strategic fit', with 'significant synergies'. Who said white goods couldn't be sexy?
Electrolux will continue to use the GE Appliances name in the US, which makes sense as the division has been around for 100 years.
But the US giant is trying to focus less on such low-margin businesses and more on its industrial output, making everything from aeroplane engines to medical equipment. Its previous attempt to flog the appliances wing took place in 2008 – the worst time to sell anything. Whereupon it found its chances of success were about as strong as those of a herring in a blender.