GE gets regulatory approval to sell appliance business to China's Haier Group
04 March 2016
US anti-trust authorities yesterday approved General Electric Co's (GE) proposed sale of its appliance business to China's Haier Group for $5.4 billion.
The US Department of Justice (DoJ) completed its review of the proposed transaction and approved the deal, a GE spokeswoman told Reuters.
Early this year, diversified US conglomerate GE struck a deal to sell its appliance business to China's Haier Group for $5.4 billion in cash (See: GE to sell appliance business to China's Haier Group for $5.4 bn).
The sale is part of GE's plan to divest around $200 billion worth of non-core assets in order to transform itself into a pure-play industrial-manufacturing company.
The deal came a month after GE called off a $3.3-billion deal to sell its appliances business to Sweden's Electrolux AB, after the US antitrust regulators opposed the deal.
The DoJ had filed a lawsuit in July last year, seeking to halt the proposed acquisition saying that the deal would push up the price of appliances by 5 per cent since Electrolux, GE and Whirlpool hold more than 90 per cent of major kitchen appliances sold in the US to home-builders. (GE calls off $3.3 bn appliances deal with Electrolux on regulatory fears)
Haier outbid other foreign bidders to clinch the deal. For the Chinese appliances giant, a manufacturing base in the US would protect it from tariffs on foreign imports.
The transaction includes GE Appliances' 48.4-per cent stake in Mabe, a Mexican appliance company that has a joint venture and a sourcing relationship with the business for 28 years.
Under GE chairman and CEO Jeff Immelt, the company has divested its consumer finance portfolio, while expanding gas turbines, oilfield equipment and jet engines businesses.
GE had said in 2008 it would explore options to sell or spin off the business, but postponed it due to the financial crisis.
After the sale of the appliances business, GE's last remaining consumer business will be its light-bulb division. In 2014, the appliances and lighting unit generated $8.4 billion in sales, accounting for about 5.5 per cent of GE's total revenue, Bloomberg reported.
The transaction with Haier values GE Appliances at 10 times its last 12 months of earnings before interest, taxes, depreciation, and amortisation. The sale will generate an after-tax gain of approximately $0.20 per share at closing. GE expects to offset the gain with restructuring in 2016.
GE Appliances' products include refrigerators, freezers, cooking products, dishwashers, washers, dryers, air conditioners, water filtration systems and water heaters.
The company had around $5.9 billion in revenue and $0.4 billion in EBITDA. The company employs approximately 12,000 employees globally, 96 per cent of whom are based in the US.
The sale will allow GE to focus on its industrial business instead of appliances or finance.
Haier already has sales and marketing units and retail and services networks across North America. It also has a plant in South Carolina producing products including refrigerators.
Its last major overseas acquisition was in 2011 when it acquired a controlling stake in New Zealand's Fisher & Paykel Appliances Holdings for about $487 million.
Qingdao, Shandong Province-based Haier is the world's fourth largest white goods manufacturer with 2014 turnover of $ 32.6 billion and profit of $ 2.4 billion.