China’s Qingdao Haier to Pay $5.4B for Appliance Business

Hong Kong: China’s Haier Group agreed to buy General Electric Co.’s (GE’s) appliance business for $5.4 billion in what would be the country’s biggest acquisition of an overseas electronics company.

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 has shifted emphasis from its traditional businesses like appliances to areas of higher technology such as clean energy and medical equipment.

This video includes images from Getty Images. Shanghai-listed Qingdao Haier, whose shares have been halted since October 19, will continue to be suspended on January 18. The previous day, a state-owned chemical company announced the purchase of a German manufacturer for $1 billion. The deal is the third largest acquisition of an American business by a Chinese company.

Haier has struggled to compete in the U.S. While it calls itself the biggest appliance maker in terms of unit sales, Haier is mainly known in the U.S. for niche products such as compact refrigerators and window air-conditioning units.

GE’s appliance unit has more than 12,000 employees, a lot of them in the US, and nine factories in the U.S.

The deal comes weeks after GE walked away from a deal to sell the business to Sweden’s Electrolux (ELUXb.ST) for $3.3 billion, following months of opposition from US antitrust regulators.

GE chairman/CEO Jeff Immelt, who has long regarded the majap unit as a non-core business, said its solid performance had drawn “significant interest from potential buyers”, and described the new marriage as a good match.

Haier, headquartered in the eastern Chinese city of Qingdao, makes a wide range of refrigerators, washing machines and other home appliances.

By snapping up GE Appliances, Haier is able to penetrate an entire continent.

The quick turnaround from the failed Electrolux deal supports Immelt’s effort to reshape the Fairfield, Connecticut-based company around industrial-manufacturing operations.

Zhang Ruimin, CEO of the company acquiring GE, is recognized not just for leading a high-performing and truly entrepreneurial global business but also for organizing that company around a conceptual framework that has guided its development for years. After accounting for synergies, Haier’s management believes it paid about 8.2 times EBIDTA for GE Appliances. “In addition, we see the opportunity to work together to build the GE brand in China”.

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