China’s Haier Group Buying General Electric’s Appliance Division For $5.4 Billion

GE announced Friday that it had entered an agreement to sell GE Appliances to China-based Haier for $5.4 billion.

Haier ranks seventh globally in the home appliance market, with GE in 19th, data from research firm Euromonitor shows.

GE Appliances will continue to be headquartered in Louisville in Kentucky and run by its current management team. GE previously tried to sell the business last December to Swedish giant Electrolux for $3.3 billion, but walked away from the deal after opposition from American antitrust regulators.

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“Haier had always fancied themselves the GE of China so now they get the real thing”, Steven Winoker, an analyst at Sanford C. Bernstein & Co., said in a note.

GE stock is down 2% Friday.

Hong Kong-listed Haier Group’s share price rose 1% to HK$12.84 following the news, in contrast to Midea’s, which fell 4% to Rmb28. GE had originally meant to sell the unit to Sweden’s Electrolux for $3.3 billion but the US Justice Department blocked that deal, claiming it would damage competition.

Since then, Haier has been vying for more US retail partners, tapping major advertising agencies in an effort to become a household name. It is not clear how much of this is split between Appliances and the LED and lighting business, though GE has noted that both are very low margin businesses.

The GE deal will boost Haier’s ambitions of becoming a “world brand”.

GE Appliances reported United States dollars 5.9 billion in 2014 revenue.

GE expects to offset the gain with restructuring in 2016.

Prior to this deal, Haier commanded about 10% of the global appliances market, but less than 1% of the lucrative USA market, which has been growing by 6.1% annually over the last three years.

However, with its almost century old electrical appliance unit, Immelt has been under pressure. GE also will help Haier improve its manufacturing efficiency. He’s selling the consumer-focused business that makes stoves, washing machines and microwave ovens – along with the bulk of GE’s lending arm – while expanding divisions making products such as gas turbines, oilfield equipment and jet engines.

The purchase is the third in a string of multibillion-dollar foreign acquisitions this week by Chinese buyers.

“Haier is committed to investing in the USA”, he continued.

Fischer said a challenge for Louisville is to ensure that it’s providing a quality workforce for businesses like GE Appliances.

If the sale receives regulatory and shareholder approval, Crittendon said the existing union agreement would be honored for the first 12 months, meaning workers’ benefits and pay would stay the same.