Haier Stumps Up $6.4B For GE Appliance Business
The Australian appliance market is in for a shake up after Chinese Company Haier, forked out $6.4 Billion to buy General Electric’s appliance division.
Haier who acquired Fisher + Paykel could be selling General Electric products in Australia by late 2016 according to sources.
The deal will see Haier selling GE branded refrigerators, washing machines and other larger appliances in Australia up against LG, Samsung, Panasonic who are looking to expand their appliance offerings in Australia and Electrolux who missed out on acquiring GE appliances late last year.
“Haier has a good track record of acquisitions and of managing brands,” GE Chairman and Chief Executive Jeff Immelt said in a news release.
Qingdao Haier Co., a Shanghai-listed company in which Haier owns 41%, will acquire the GE appliance unit, Haier said.
The deal, values GE Appliances at 10 times the last 12 months of earnings before interest, taxes, depreciation and amortization, according to GE.
The Wall Street Journal said that GE has been running an auction for the century-old appliance business since it abandoned a $3.3 billion sale to Sweden’s Electrolux AB in December.
The U.S. Justice Department had sued to block that transaction, saying the combination of the two companies would hurt competition for cooktops and ranges. Haier may face fewer antitrust hurdles than Electrolux because of its small presence in the U.S.
In seeking a fresh buyer, GE executives wanted a better deal than they had gotten from Electrolux, one-person familiar with the matter said. GE also stands to receive a $175 million breakup fee from Electrolux.
The GE transaction, will accelerate the Chinese company past Electrolux and other rivals in the U.S. market for white goods, which currently is led by Whirlpool. Sales for the GE Appliances and Lighting division, of which appliances is the lion’s share, were $8.4 billion in 2014.
Haier, which had $32.6 billion in revenue world-wide in 2014, growth overseas is critical. Profit margins from the company’s refrigerators and washing machines in China are razor-thin due to increased competition at home, where online shopping has sparked price wars, pushing down prices in the electronics and appliances sector.