Striking its biggest ever deal, Sweden-based tech firm Electrolux AB on Monday said that it would double its sales in the US after paying USD 3.3 billion in cash for appliances business of General Electric Co.
Experts say the major deal would help the Swedish appliance giant give a tough fight to rival Whirlpool in the American market.
The century-old household appliance business of General Electric Co. generated USD 5.7 billion in revenue in the year 2013.
With the backing of GE, Electrolux could expand its hold beyond its core European market.
“I think it is a historic event for Electrolux. I am very excited about it. I think the fit – the strategic fit, the industrial logic – is compelling,” Keith McLoughlin, Chief Executive of Electrolux said.
Electrolux is the second-largest appliance maker by sales in the world. With the new buy, the company will see a significant surge in its annual sales in North America which will be more than double to over USD 10 billion. Experts say the sales figure is similar in size to that of Whirlpool’s in North America.
The company will also keep the iconic GE Appliance brands which sells range of appliances including refrigerators, air conditioners, stoves and water heaters under the brand names GE Café, GE Monogram and Hotpoint.
Talking about the price of the deal, the analysts said that Electrolux was not overpaying even if the price tag is higher than the estimated range of USD 2 billion to USD 2.5 billion.
The deal between the companies also includes GE’s 48.4 percent stake in Mabe, a Mexican appliance maker.
According to the analysts, the deal has given a good opportunity to Electrolux to get access to both North and South America and that too in a very positive way which will in future give the company a stronghold over entire America.
“If they manage to realize the synergies, it’s clearly a good multiple. The inclusion of the Mabe stake would strengthen the position of Electrolux in Latin America on top of the clout it is gaining in North America.,” said Johan Eliason, an analyst from Kepler Cheuvreux.
Electrolux said that the deal will be financed through a bridge facility. The company has also planned a rights issue to raise about 25 percent of the price after the closing of the deal expected next year.
Meanwhile, the Electrolux shares rose five percent at 197.10 crowns, outperforming the Stockholm market. On the other hand, GE shares traded .27 percent or 7 cents higher at USD 26.17 per share.