Electrolux To Acquire GE Appliances For $3.3 Billion

Electrolux announced it has entered into an agreement to acquire the appliances business of General Electric (“GE Appliances”), one of the premier manufacturers of kitchen and laundry products in the United States, for a cash consideration of USD 3.3 billion. The acquisition enhances Electrolux’s position as a global player in home appliances, offering an unparalleled opportunity to invest in innovation and growth, which will benefit consumers, retailers, employees and shareholders.

“This is an historic moment and important strategic move for the Electrolux Group, which takes our company to a new level in terms of global reach and market coverage. GE’s premium, high-quality appliances complement our own iconic brands and will enhance our presence in North America,” said Keith McLoughlin, President and CEO of Electrolux. “The acquisition, which is our largest ever, strengthens our commitment to the appliance business and also provides Electrolux with the scale and opportunity to accelerate our investments in innovation and global growth.”

Jeff Immelt, Chairman and CEO of GE, said, “Electrolux is the right global business for our customers, consumers and employees. GE Appliances’ people, valuable home appliances brand, products, distribution, and service capabilities make it a perfect fit with Electrolux and its goal of accelerating growth in the U.S.”

Description of GE Appliances

GE Appliances is headquartered in Louisville, Kentucky, and generates more than 90% of its revenue in North America. GE Appliances’ product portfolio includes refrigerators, freezers, cooking products, dishwashers, washers, dryers, air conditioners, water filtration systems and water heaters. Its revenue split by major product category is approximately 35% cooking, 25% refrigeration, 20% laundry, 10% dishwashers and 10% home comfort (A/C). The company operates its own distribution and logistics network and has nine well-invested manufacturing facilities with 12,000 employees. The acquisition includes a 48.4% shareholding in the Mexican appliance company Mabe. For nearly 30 years, GE Appliances has had a joint venture with Mabe in Mexico where Mabe develops and manufactures portions of GE Appliances’ product offering.

In 2013, GE Appliances had sales of USD 5.7 billion (SEK 37 billion) and an EBITDA of USD 390 million (SEK 2.5 billion) including share of income from Mabe.

Transaction rationale and synergies

The acquisition of GE Appliances is an important step for Electrolux towards realizing the Group’s vision: to be the best appliance company in the world as measured by customers, employees and shareholders.

The scale and efficiencies from combining the businesses create a solid financial foundation from which to drive growth in the increasingly global and competitive appliance industry. The Electrolux Group will further strengthen its capacity to invest in innovation and growth.

The fit between Electrolux and GE Appliances creates a strong platform for growth in the North American appliance market and enables the combined business to better serve North American consumers. GE Appliances has a strong offering to consumers complementing Electrolux’s current brands in the United States. Electrolux has secured the right to the GE Appliances brands through a long term license agreement with GE. GE Appliances’ nationwide distribution and logistics network also provides an opportunity to offer an even wider range of products to a broader consumer base.

“GE Appliances is a well-run operation with strong capabilities in key areas such as R&D, engineering, supply chain and customer service, and we look forward to joining forces with their team of talented and competent people,” Keith McLoughlin said.

The transaction is expected to generate annual cost synergies of approximately USD 300 million. One-off implementation costs and capital expenditures are estimated to USD 300 million and USD 50-70 million respectively. The largest parts of the synergies are expected in sourcing, operations, logistics and brands.

Proforma financials

The proforma combined 2013 sales figure for Electrolux and GE Appliances is USD 22.5 billion (SEK 147 billion) and EBITDA is USD 1.5 billion (SEK 9.7 billion). Electrolux and GE Appliances together have 73,000 employees.