Haier to Acquire Appliance Unit of GE

A lush premiumHaier agreed to purchase GE Appliances for 10 times trailing-12-month earnings before interest, taxes, depreciation, and amortization, or EBITDA. The sale will generate an after-tax gain of approximately $0.20 per share at closing.

“This transaction underscores Haier’s devotion to creating a global platform for innovation, which will benefit both Haier and GE Appliances and deliver enhanced value to all stakeholders”, he said.

Haier has a long-term agreement to use the GE Appliance brand and Louisville, Ky., will remain the headquarters for the business.

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

Dana Crittendon, who is president of the union that represents many local workers, said the agreement between GE and Haier was “good news” for the more than 4,000 workers represented by Local 761.

Haier, which made an abortive attempt in 2008 to buy the business, has a negligible presence in the US white goods market, dominated by Whirlpool Corp (WHR.N), Sweden’s Electrolux AB (ELUXb.ST) and GE. It has two quoted subsidiaries, Haier Electronics in Hong Kong and Qingdao Haier in Shanghai – which is the vehicle for the GE acquisition.

Pareto Securities analyst David Jacobsson Cederberg said Haier’s acquisition will bring further competitive pressure to the North American market at a time when growth prospects in emerging markets are petering out.

Added John Crockett, the incoming chairman of Greater Louisville, Inc.: “It appears to be the best-case scenario for GE Appliance Park and for our city”.

The deal includes GE Appliances’ 48.4% stake in Mabe, a Mexican appliance company that has operated a joint venture and has had a sourcing relationship with GE Appliances for 28 years, Haier said.

“We expect the (deal) confirmation to increase concerns on the dynamics in the USA appliances industry”, Morgan Stanley analyst Lucie Carrier wrote in a note to clients. Both companies will also work together to develop and grow affordable consumer health initiatives in China, according to the statement.

In addition to agreeing to the sale of the unit, the two companies signed a memorandum of understanding to “cooperate globally and jointly pursue growth project in focus areas” such as the industrial internet, healthcare, and advanced manufacturing. GE could not be immediately reached for comment outside regular business hours. The price was expected to be higher than what Electrolux would have paid in part because the business had improved over the past few years.