STOCKHOLM — General Electric has terminated the planned acquisition of its appliance business by the Swedish manufacturer Electrolux, which U.S. authorities opposed, both companies announced Monday.
Electrolux had sought to snap up GE appliances for some $3.3 billion, which would have lifted it into the orbit of market leader Whirlpool. But the Department of Justice was suing Electrolux and GE over concerns the deal would create a duopoly and hand Electrolux a U.S. market share of some 40%.
Electrolux said it had made extensive efforts to obtain regulatory approval, and regretted that GE terminated the agreement while the court procedure was still pending. The Swedish company said the settlement proposals that were offered to the Justice Department were reasonable and that it would have addressed the U.S. government’s competition concerns. These proposals were rejected.
“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,” Electrolux president and CEO Keith McLoughlin said.
“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.”
Monday’s announcement took some analysts by surprise.
“I was surprised this deal was contested by the Justice Department, but then when we saw what their concern, which was the creation of duopoly in a part of the appliance market, it began not to look so good,” said Karri Rinta, an analyst with Handelsbanken Capital Markets. “It’s back to square one for Electrolux in North America. This is a deal that would have made them much stronger – in the U.S. especially against Samsung and LG.”
Under the transaction agreement, Electrolux is required to pay GE a termination fee of $175 million, and GE has requested payout.
“It’s not going to have much effect on a company of this size. But it’s embarrassing and it underscores the steep and unfortunate price of a failed deal,” Rinta said.
McLoughlin said Electrolux was still committed to the American market.
“Major Appliances North America 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,” he said. “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.”
For the period from January to September 2015, transaction costs related to the acquisition of 266 million kronor ($31.18 million) and cost for preparatory integration work of 136 million kronor ($15.94 million) have been charged, the company reported.
For the fourth quarter 2015, transaction costs and integration costs are expected to amount to approximately 175 million kronor ($20.51 million). The results for the fourth quarter 2015 will also be impacted by costs arising from a bridging facility of approximately 225 million kronor ($26.38 million), Electrolux said in its press release.
Electrolux shares plunged on the Stockholm stock exchange in reaction to the announcement, trading down over 12% at 209.60 kronor ($24.57) around 1000 GMT, having initially dropped by 14%.
Copyright Agence France-Presse, 2015