Electrolux to acquire GE Appliances
Electrolux has entered into an agreement to acquire the appliances business of General Electric, one of the leading manufacturers of kitchen and laundry products in the United States, for a cash consideration of $3.3 billion.
"This is a 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."
"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.," added Jeff Immelt, chairman and CEO of GE.
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.
Electrolux looks to leverage the acquisition to enhance its position as a global player in home appliances. The company believes that by adding GE Appliances to its portfolio it will create a strong platform for growth in the North American appliance market and enable the combined business to better serve North American consumers.
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," McLoughlin said.
The transaction is expected to generate annual cost synergies of approximately $300 million. One-off implementation costs and capital expenditures are estimated to $300 million and $50‑$70 million, respectively. The largest parts of the synergies are expected in sourcing, operations, logistics and brands.
The proforma combined 2013 sales figure for Electrolux and GE Appliances is $22.5 billion and EBITDA is $1.5 billion. Electrolux and GE Appliances together have 73,000 employees.
Completion of the transaction is mainly subject to regulatory approvals. The acquisition is expected to close during 2015. Electrolux has agreed to pay a termination fee of $175 million in certain circumstances involving the failure to obtain regulatory approvals.
The acquisition of GE Appliances will be funded by a committed bridge facility arranged by Deutsche Bank AG and Skandinaviska Enskilda Banken AB (publ). The bridge facility is planned to gradually be replaced by capital market and bank financing (approximately 75%) and a rights issue (approximately 25%). The board of directors of Electrolux will invite the shareholders to a general meeting and make a proposal on the rights issue. The rights issue is intended to be completed following completion of the transaction.
Deutsche Bank and SEB Corporate Finance are acting as financial advisers to Electrolux. Davis Polk & Wardwell is acting as lead legal adviser to Electrolux. Goldman Sachs provided financial advice to GE, and Sidley Austin LLP was GE’s legal adviser.