General Electric has terminated the planned acquisition of its appliance business by the Swedish manufacturer Electrolux, which US authorities opposed, both companies announced Monday. The $3.3 billion (about 3 billion euros) deal was announced in September 2014, but was soon in trouble after the US Justice Department said the deal would hand Electrolux a US market share of some 40 percent.
Justice sued both companies and said the deal was unfair because it would combine two of the leading manufacturers of ranges, cooktops and wall ovens sold in the United States, eliminating competition that benefits US consumers. "In the courtroom, facts matter, rhetoric does not," Deputy Assistant Attorney General David I. Gelfand of the Justice Department's Antitrust Division said in a press release. "This deal was bad for the millions of consumers who buy cooking appliances every year. Electrolux and General Electric could not overcome that reality at trial," he said. GE's announcement took many by surprise since a verdict wasn't expected until the next few weeks or January.
"I was surprised this deal was contested by the Justice Department, but then when we saw what their concern was, 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," two South Korean competitors, he said. Under the transaction agreement, Electrolux is required to pay GE a termination fee of $175 million. GE has requested pay-out of the amount. "It's not going to have much effect on a company of this size. But it's embarrassing and it underscores the steep and unfortunate price of a failed deal," said Rinta.
Electrolux President and Chief Executive Keith McLoughlin said the company was still committed to the US market. "Major Appliances North America has a strong presence in the US under the brands Frigidaire and Electrolux, and we are confident that this position will be maintained and strengthened," he said.
"The strategy to grow profitably in promising segments, product categories and emerging markets remains. The Group's operations in North America have proved to be strong on its own merits, with good organic growth and a recovery in earnings during 2015," he said in a press release. But the Swedish group also expressed its disappointment. "Electrolux has made considerable efforts to obtain regulatory approvals, and regrets that GE has terminated the contract while the legal process is still pending," McLoughlin wrote in a statement. His position at Electrolux seemed precarious after this setback.
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