Strategy

GE Sells Appliance Business to China’s Haier

GE Appliances trails only Whirlpool in the U.S. white goods market, giving Haier a greatly expanded footprint.
Katie Kuehner-HebertJanuary 15, 2016

Chinese home appliance maker Haier Group has agreed to acquire General Electric’s appliance business for $5.4 billion, a move that will greatly expand its footprint in the U.S.

GE had previously agreed to sell the business to Sweden’s Electrolux for $3.3 billion but the deal was abandoned after regulators raised antitrust concerns.

GE Appliances makes refrigerators, freezers, clothes washers and dryers across brands such as Monogram, Café, Profile and Artistry. It trails only Whirlpool in the U.S. white goods market and reported revenue of $5.9 billion last year.

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Haier accounted for less than 5% of the market last year. Analysts expressed concern about the impact its bigger presence would have on pricing.

“Even if Haier doesn’t have a history of dumping prices in the United States, as for example LG and Samsung has, this is still an unknown player, a Chinese player,” DNB Bank ASA analyst Christer Magnergard told Reuters.

The sale is the third largest acquisition of a U.S. company by Chinese investors, according to CNNMoney.

Feng Zhang, a consumer appliances analyst at Euromonitor, said the business is attractive because of its strong position in the U.S., a market that accounts for more than 10% of major appliance sales worldwide.

Haier said the transaction includes GE Appliances’ 48.4% stake in Mabe, a Mexican appliance company that has a joint venture and a sourcing relationship with the business.

The transaction values GE Appliances at 10 times the last 12 months of earnings before interest, taxes, depreciation, and amortization, GE said. The sale would generate an after-tax gain of about 20 cents per share at closing, expected in mid-2016. GE expects to offset the gain with restructuring in 2016.

Haier will continue to use the GE Appliances brand and retain the business’s headquarters in Louisville, Kentucky and its current management team, the companies said.