With Two Electronics Sector Giants Joining Hands, Global Electronics Industry to Witness Change in Competitive Dynamics

Published Date : Jan 15, 2016

China’s multinational consume electronics and home appliances company Haier is all set to buy the appliances business of General Electric Co. (GE). The company has said that General Electric has agreed to sell the appliances business to Haier for US$5.4 bn in cash, a month after the company had abandoned a similar deal with the Sweden-based company Electrolux.

Electrolux had proposed a US$3.3 bn deal, which fell through owing to the huge opposition it faced from antitrust regulators in the U.S.

The deal is expected to boost the presence of Haier in the U.S., is the biggest deal so far by Haier. The deal will be subject to antitrust approvals in the U.S., Mexico, and Argentina and customary filings in Haier’s parent country China.

The deal is also to be approved by the stakeholders of Haier – Haier Group and KKR, who own a joint share of 50.8% of the company.

After the deal has materialized, Haier will retain the GE appliances headquarters in Louisville, Kentucky as well as the company’s current management team and will continue to use the GE Appliances brand.

The transaction includes 48.4% share of GE Appliances in Mabe, an appliances company headquartered in Mexico with which the company has been in a joint venture for the past 28 years, Haier has said.

Analysts state that the deal will increase concerns regarding the overall dynamics of the U.S. appliances market. 

Haier currently has limited presence in the U.S. and thus the acquisition will be complementary to the company’s existing range of operations and products. It will give Haier additional sales channels in the country and will help in building better relationships with retailers.

General Electronics has said that the deal will generate an after-tax income of over 20% per share upon closure of the deal. 

GE Appliances had nearly US$400 mn worth funds in EBITDA and nearly US$5.9 bn in revenue. The company has an employee base of nearly 12,000 workers, over 96% of whom are based in the U.S.