Haier to Buy GE Appliance Unit, HQ

STOCKHOLM-Sweden’s ElectroluxELUXY -5.44 % AB faces a complex strategic challenge following General Electric Co.GE -2.74 % ‘s decision to sell its appliances business to a Chinese company: how to counter the onslaught of Asian appliance makers in its traditional Western markets while conquering positions in emerging countries.

The deal, which has been approved by both companies’ boards, is subject to regulatory and shareholder approvals, GE said.

GE’s Immelt hailed the agreement as “a good deal which will benefit our investors, customers and employees”.

The deal is expected to be completed during the second quarter of this fiscal year. The U.S. Justice Department had sued to block that transaction, saying the combination of the two companies would hurt competition for cooktops and ranges. GE Appliances provides Haier with great products, state-of-the-art manufacturing facilities and a talented team.

Haier will continue sales under the same brand name and operate from the current headquarters of electronic appliances, in Louisville, US.

This acquisition was announced in a prepared statement on Friday and comes as China-based Haier the largest maker of home appliance in the world, attempts to transform into a premium appliance brand.

Qingdao Haier – a unit of Haier Group, which owns 41% of it – will acquire GE’s appliances business.

He said Haier will have about 15 to 20 percent of the appliance market, as General Electric does now. It trails only Whirlpool in the USA white goods market and reported revenue of $5.9 billion past year.

GE specializes in large appliances such as dishwashers and refrigerators and boasts a strong brand in North America, where homes typically come furnished with appliances. In seeking a fresh buyer, GE executives wanted “a better deal” than they had gotten from Electrolux, one person familiar with the matter said.

The two companies have also announced a long term strategic partnership to explore cooperation in the areas of industrial internet, healthcare, and advanced manufacturing.

“We’re looking for job security and with Haier I think we’ll get that”, he said.

“We are proud of Appliances’ history and performance”, Jeff Immelt, GE chairman and CEO, said in a blog post.

According the General Electric Company said the deal values the appliance business at 10 times as compared to last 12 months earnings before interest, depreciation, amortization (EBITDA) and taxes, . Indeed, the $4 billion in cash will probably more than offset the sale if it is used to buy back stock. It’s the leading appliance manufacturer globally, but it can only claim 1.1 percent of the United States appliance market.