On September 8, 2014, Electrolux announced it has entered into an agreement to acquire the appliance business of General Electric (“GE Appliances”), one of the premier manufacturers of kitchen and laundry products in the United States, for a cash consideration of USD 3.3 billion. The acquisition enhances Electrolux position as a global player in home appliances, offering an unparalleled opportunity to invest in innovation and growth, which will benefit consumers, retailers, employees and shareholders.
The acquisition of GE Appliances is an important step for Electrolux towards realizing the Group’s vision: to be the best appliance company in the world as measured by customers, employees and shareholders. The scale and efficiencies from combining the businesses create a solid financial foundation from which to drive growth in the increasingly global and competitive appliance industry. The Electrolux Group will further strengthen its capacity to invest in innovation and growth. Electrolux has secured the right to the GE Appliances’ brands through a long-term license agreement with GE. The transaction is expected to generate annual cost synergies of approximately USD 300 million. One-off implementation costs and capital expenditure are estimated to USD 300 million and USD 50–70 million, respectively. The largest parts of the synergies are expected in sourcing, operations, logistics and brands.
Electrolux will acquire GE Appliances for a cash consideration of USD 3.3 billion. The deal is structured primarily as an asset transaction. Completion of the transaction is mainly subject to regulatory approvals. The acquisition is expected to close during 2015. As is customary in the United States in certain types of transactions, Electrolux has agreed to pay a termination fee of USD 175 million in certain circumstances involving the failure to obtain regulatory approvals.
| USD billion1) | Electrolux | GE Appliances incl. 48.4% of Mabe | Combined |
|---|---|---|---|
| Sales | 16.8 | 5.7 | 22.5 |
| EBITDA | 1.1 | 0.4 | 1.5 |
| EBITDA margin, % | 6.8 | 6.8 | 6.8 |
1) Figures in SEK have been converted to USD at an exchange rate of SEK/USD 6.515, the average exchange rate in 2013.
The above figures are for illustrative purposes and do not include any impact from synergies, implementation costs and amortization of surplus values resulting from the purchase-price allocation. The effect of the transaction on Electrolux earnings per share is expected to be accretive from year one. The EBITDA multiple for the full year 2014 is expected to be in the range of 7.0-7.3x. The transaction is expected to contribute positively to cash flow. The financial position of Electrolux, after completion of the planned rights issue, is expected to be consistent with a financial policy to retain an investment grade credit rating.
For more information on the rationale behind the acquisition, as well as financing, please read the full press release and listen to the investor and press telephone conference held on September 8 at www.electroluxgroup.com/ir.
GE Appliances is headquartered in Louisville, Kentucky, and generates more than 90% of its revenue in North America. GE Appliances’ product portfolio includes refrigerators, freezers, cooking products, dishwashers, washers, dryers, air-conditioners, water-filtration systems and water heaters. Its revenue split by major product category is approximately 35% cooking, 25% refrigeration, 20% laundry, 10% dishwashers and 10% home comfort (A/C). The company operates its own distribution and logistics network and has nine well-invested manufacturing facilities with 12,000 employees. The acquisition includes a 48.4% shareholding in the Mexican appliance company Mabe. For nearly 30 years, GE Appliances has had a joint venture with Mabe in Mexico where Mabe develops and manufactures portions of GE Appliances’ product offering. In 2013, GE Appliances had sales of USD 5.7 billion (SEK 37 billion) and an EBITDA of USD 390 million (SEK 2.5 billion) including share of income from Mabe.