Home appliance king Electrolux sets to buy GE Appliances from GE; General Electric secures increased profits by 2016
A definitive agreement has been signed between General Electric and Electrolux. The transaction is regarding GE’s plan to sell its appliance brand to Electrolux for $3.3 billion. This is a long term agreement between the two appliance giants to continue GE’s legacy and technology. GE and Electrolux board of directors has approved the transaction and will wait for customary closing conditions as well as regulatory approvals. This partnership is set to close in 2015.
Jeff Immelt, General Electric Chairman and CEO has commented in an interview that this recent transaction with Electrolux is consistent with GE’s commitment to provide the best infrastructure and technology. He mentioned: “We are creating a new type of industrial company, one with a balanced, competitively positioned portfolio of infrastructure businesses with strong advantages in technology, growth markets, driving customer outcomes, and a culture of simplification.”
In 2014, General Electric has undergone massive changes in order to improve its portfolio. One of the most recent steps to reshape the company was taken in June when GE’s offer for Alstom’s Power and Grid was accepted by the board of directors of Alstrom. GE is known as a technology leader when it comes to power and water and is also known to have a higher growth margin when it comes to these industries.
This agreement between General Electric and Electrolux is a part of the company’s 2014 portfolio which highlights longer –term redeployment of GE’s capital from non-core assets like media, plastics and insurance to oil and gas, aviation, power and healthcare which are considered high-margin businesses. By strategizing their portfolio, it is estimated that General Electric will achieve 75% of its profits from its partner industrial businesses by the year 2016.
Immelt continued to comment on the latest sell out: “GE Appliances is a great business and we are proud of the role it has played in GE’s history.” He added “Electrolux is the right global business for our customers, consumers and employees. We have greatly strengthened this franchise in the past few years. 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 US. Like GE Appliances, Electrolux has nearly 100-year history in home appliances and they share the same principles of quality, innovation and customer value as GE. They are committed to supporting the growth of GE Appliances and value the GE Appliances team and its capabilities.”
On the other hand, Keith McLoughlin, President and CEO of Electrolux also complemented General Electric’s value as a consumer brand. “GE Appliances is a well-run operation with strong capabilities in key areas such as R&D, engineering, supply chain and consumer service.” He further added that Electrolux is looking forward to joining forces with General Electric and its team of talented and competent workers and employees.
The sale of GE Appliance to Electrolux will generate an approximate after tax gain of $0.05 to $0.07 per share at closing. It is estimated that the transaction values of GE Appliance is at 8.0 times the last 12 months of earnings and this is before interest, taxes, depreciation, and amortization. General Electric’s financial adviser is Goldman Sachs and Sidney Austin LLP is the company’s legal advisor.
Details of this sale will be provided by representatives of General Electric and AB Electrolux after formalities have been settled and the partnership closed next year.
About General Electric
General Electric or GE is a multinational conglomerate corporation in the US with headquarters in Fairfield, Connecticut and incorporated in New York. GE is behind segments such as energy, technology infrastructure, capital finance and consumer and industrial. The company ranked 26th in the Fortune 500 list according to revenue and the 14th as the most profitable in 2011.
About Jeff Immelt
Jeffery Robert “Jeff” Immelt is an American business executive and current chairman of the board and chief executive officer of General Electric Company. He has held leadership seats in GE since 1982 and these include GE Plastics, Healthcare and Appliances.
About AB Electrolux
AB Electrolux is a leader in kitchen appliances, indoor and outdoor cleaning equipment and professional appliances for businesses. AB Electrolux is a Swedish multinational company with headquarters in Stockholm, Sweden. It is the second-largest manufacturer of appliances when it comes to units sold. Electrolux stock market evolution:
About Keith McLoughlin
Keith McLoughlin is the President and CEO of AB Electrolux since 2011. Keith is responsible for research and development, manufacturing and purchasing for Electrolux Major Appliances. Before he joined Electrolux, he held management positions in DuPont Corporation, Tyvek, Stainmaster and Corian.