Swedish group maker Electrolux has agreed to buy white goods activities - washing machines to fridges - from US conglomerate General Electric raising its status as a rival to Whirlpool, it announced on Monday. The deal, worth $3.3 billion (2.55 billion euros), will pitch Electrolux in head-on competition with Whirlpool in the huge US market.
The agreement covers a wide range of household appliances but puts Electrolux at risk from increasing debts and greater dependence on sales in the United States. The investment is substantial for Electrolux, which is being watched closely by credit rating agencies. "This is our largest acquisition ever," Electrolux chief executive Keith McLoughlin said during a conference call.
General Electric (GE) has sought for some time to focus on manufacturing offering increased profit margins in such fields as energy, health care and aeronautics, as well as gradually withdrawing from the financial sector, and has tried to sell its white-goods division since 2008. "White goods" is a term referring to such big household items such as washing machines, dishwashers and fridges which are traditionally white, but covers many types of electrical equipment for the home and also professional sectors.
It is a sector in which big, long-established brands have suffered from strong competition from emerging markets, notably in asia in the last 20 years. The US giant will make a capital gain of between $0.05 and $0.07 per share (about $500 to $700 million in total). "This transaction is consistent with our strategy to be the world's best infrastructure and technology company," GE chairman and CEO Jeff Immelt said in a statement. "We are creating a new type of industrial company, one with a balanced, competitively positioned portfolio of infrastructure businesses with strong advantages in technology, growth markets, driving customer outcomes and a culture of simplification."
The boards of directors of both companies have approved the transaction. It is now subject to closing conditions and regulatory approvals, and is due to close next year. When the acquisition becomes effective in 2015, according to both groups' estimates, Electrolux's revenue will jump from $17 billion to $22.5 billion.
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