LG, Haier frontrunners for GE appliances unit: Immelt

28 May 2008

Almost a fortnight after General Electric (GE) announced its intention to sell off its appliances division, it has finally disclosed possible contenders by naming Haier of China and LG of South Korea as the frontrunners. GE said this month it might sell the unit amid calls for the company to speed up divestitures of slower-growing operations.

During a breakfast meeting with businessmen in the South Korean capital, Seoul, GE CEO Jeffrey Immelt made this revelation. ''The players become very obvious,'' he said, ''its Haier in China, LG in Korea and so on. Of course, LG is one of the leading candidates.'' In addition, he cited buying interest from Mexico's Controladora Mabe, a unit of Controladora Comercial Mexicana, and Turkey's Arcelik.

Louisville, Kentucky-based GE's appliance unit had revenues of about $7 billion in 2007, around 27 per cent of the market, and is the No 2 US appliance company by volume behind Whirlpool, which was quite some distance ahead with annual sales of $18 billion last year. However, if global sales are considered, Whirlpool leads in sales of household appliances, followed by Electrolux and LG.

Sales of washers, refrigerators and other appliances accounted for more than half of last year's $13.3 billion in sales at GE Consumer & Industrial. GE had total revenue of $172.7 billion last year. More than half of the company's sales come from overseas, while the appliances division is tied to a single market, primarily in the US.

Back on 15 May, when the news broke, The Wall Street Journal had estimated a price of $5 billion to $8 billion for the unit. It was then reported that GE had hired Goldman Sachs to conduct an auction for the appliances division, adding that possible buyers could be Germany's BSH Bosch and Siemens Hausgerate, China's Haier Group, private-equity firms or Mexico-based GE partner Controladora Mabe. (See: General Electric to sell appliance business: report)

The asking price is quite high, and not many companies would be able to pay up that amount of cash, say analysts. With the current financial crisis still raging, obtaining credit is no easy proposition, they add. In addition, Japan's Hitachi and India's Videocon (See:Videocon weighs probable bid for GE's appliance business) had also been mentioned as possible buyers, although the former subsequently denied any interest (See: Hitachi president rules out buying GE's appliances unit). Sweden's Electrolux and Korea's Samsung have also featured in several analyses.