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ELECTROLUX

Sweden’s Electrolux sees big US deal stopped

UPDATED: Shares in Swedish white goods giant Electrolux plummeted on Monday morning after US firm General Electric, which was poised to sell its appliance division to the Nordic firm, cancelled the agreement.

Sweden's Electrolux sees big US deal stopped
Electrolux's office in Kungsholmen, Stockholm. Photo: Fredrik Persson/TT
Electrolux, which sells brands including Frigidaire, AEG and Zanussi as well as its own name, is already the world's second-largest home appliance maker after Whirlpool.
 
It announced a year ago that it wanted to buy part of General Electric (GE).
 
But the US firm said on Monday that it has decided to cancel the agreement to sell its appliance division to the Swedish group which had offered last year to buy it for $3.3 billion.
 
The US Department of Justice had threatened to sue Electrolux and GE over concerns the deal would create a duopoly and hand Electrolux a US market share of some 40 percent.
 
Electrolux said it had made extensive efforts to obtain regulatory approval, and said it “regrets” that GE had terminated the agreement while the court procedure was still pending.
 
“Although we are disappointed that the acquisition will not be completed, Electrolux is confident that the Group has strong capabilities to continue to grow and develop its position as a global appliances manufacturer”, said Keith McLoughlin, President and CEO of Electrolux in a statement.
 
Shares in Electrolux — one of Sweden's most famous brands — initially dropped by 14 percent after the decision was announced, and remained 12 percent lower by mid-morning.
 
The failed deal has already cost the company millions of kronor in preparatory work and General Electric has requested a termination fee of $175 million.
 
GE revealed in a statement that it was still interested in selling the appliance division.
 
Monday's announcement took some analysts by surprise.
 
“I was surprised this deal was contested by the Justice Department, but then when we saw what their concern, which was the creation of duopoly in a part of the appliance market, it began not to look so good,” said Karri Rinta, an analyst with Handelsbanken Capital Markets.
 
“It's back to square one for Electrolux in North America. This is a deal that would have made them much stronger in the US especially against Samsung and LG,” he said.

LAWSUIT

Swedish firm embroiled in US antitrust lawsuit

Swedish giant Electrolux's attempt to snap up General Electric's appliance business has been met with a lawsuit by US antitrust officials, saying the $3.3 billion deal would harm consumers.

Swedish firm embroiled in US antitrust lawsuit
Swedish appliances firm Electrolux has been sued. Photo: Fredrik Persson/SCANPIX

The sale would limit competition and lead to higher prices of cooking appliances for US consumers, said the Justice Department, which filed the civil antitrust lawsuit in a US court in Washington.

The transaction “would leave millions of Americans vulnerable to price increases for ranges, cooktops and wall ovens, products that serve an important role in family life and represent large purchases for many households,” said Leslie Overton, a deputy assistant attorney general in the Justice Department's antitrust division.

“This lawsuit also seeks to prevent a duopoly in the sale of these major cooking appliances to builders and other commercial purchasers, who often pass on price increases to home buyers or renters.”

READ ALSO: Electrolux top boss denies plan to quit Sweden

The GE-Electrolux deal, announced in September 2014, covers a broad range of appliances, including refrigerators, dishwashers, dryers, air conditioners and water heaters.

Cooking appliances comprised the largest share of revenues at 35 percent, according to an Electrolux press release announcing the deal.

GE said it intends to “vigorously” defend the sale to the Swedish appliances giant and that it hopes to close the deal in 2015.

“GE continues to believe that GE Appliances' customers, consumers and employees will benefit from Electrolux's commitment to the appliance business and its ability to compete with global competitors,” the company said.

Electrolux, in a separate statement, said it “contests vigorously” the Justice Department position and will fight it in court.

“The appliances industry is more competitive than ever,” the company said.

“The acquisition is intended to enhance Electrolux scale and efficiencies in order to invest more in innovation and growth for the benefit of all consumers, retailers, employees and shareholders.”

The company's annual earnings soared to 2.24 billion kronor ($273 million) at the end of last year, following the implementation of a cost-cutting programme which saw about 2,000 workers laid off.