Electrolux AB revealed in a statement today that it reached an agreement with General Electric Co. over the acquisition of its home-appliances division. The deal, the companys largest takeover so far, is estimated at $3.3 billion in cash and is to add brands such as Hotpoint and GE Monogram to Electrolux portfolio.
The purchase “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,” Electrolux Chief Executive Officer Keith McLoughlin said in the statement, which was cited by Bloomberg. As reported by the Wall Street Journal, Mr. McLoughlin also added: “GEs premium, high-quality appliances complement our own iconic brands and will enhance our presence in North America.”
Electroluxs Chief Executive Officer has been trying to expand the companys reach overseas, given the slow growth in Europe in recent years. The acquisition will allow Electrolux to consolidate its presence in North America, its largest market. On the other hand, the the deal will help General Electric exit a business it has been seeking to sell for a few years as GE CEO Jeffrey Immelt reshapes the company around it high-margin industrial divisions. The deal is expected to be finalized in 2015.
Mr. Immelt said, cited by Bloomberg: “This transaction is consistent with our strategy to be the world’s best infrastructure and technology company. 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 price of the purchase surpassed initial estimates. Last weeks reports had suggested a price of $2-$2.5 billion, but the Swedish company explained that it is paying a reasonable multiple for the home-appliances unit of General Electric, which posted sales of $5.7 billion and EBITDA of $390 million in 2013.
Electrolux AB added 6.8% to trade at SEK200.40 per share at 8:13 GMT, marking a one year change of +12.21%. The company is valued at SEK57.91 billion. According to the Financial Times, the 19 analysts offering 12-month price targets for Electrolux AB have a median target of SEK185.00, with a high estimate of SEK205.00 and a low estimate of SEK132.00. The median estimate represents a -1.33% decrease from the previous close of SEK187.50.
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