General Electric announced early Monday morning that it has terminated an agreement to sell its Louisville-based appliance division for $3.3 billion to AB Electrolux, as the government’s antitrust trial to stop the acquisition was about to go into its fifth week.
The U.S. Department of Justice celebrated the announcement, saying the deal would have been bad for consumers.
However, GE said it will continue to try to sell the appliance business. The company also said the termination of the deal would have no immediate impact on the division’s roughly 6,000 employees in Louisville.
GE also said it is entitled to a $175 million breakup fee from Electrolux.
Electrolux shares plunged 13.51 percent on the Nasdaq Stockholm Monday. Bloomberg quoted an analyst who characterized the end of the acquisition as a “significant loss” for Electrolux.
The Swedish appliance maker wanted to buy the American appliance business to significantly expand its presence in North America. GE has said it wants to sell the business because it is not central to its focus.
The DoJ had alleged the deal would leave the North American market with only two major players in the appliance business — Electrolux and Whirlpool — and that consumers would see higher prices, particularly at the low end of the price range. The companies argued that the government had an incomplete understanding of the increasing competition in the market and that the deal would lead to greater competition and innovation.
The feds had filed suit July 1 to block the deal. A trial began in Washington, D.C. on Nov. 9.
David I. Gelfand, deputy assistant attorney general of the DoJ’s antitrust division, said American consumers have been “well-served” by the DoJ’s trial team.
“This deal was bad for the millions of consumers who buy cooking appliances every year,” Gelfand said. “Electrolux and General Electric could not overcome that reality at trial.”
‘Business as usual’
Employees of GE’s appliance division will see no immediate effect from the announcement, said Kim Freeman, spokeswoman for GE Appliances.
“Business as usual,” she told IL. “Regardless of where this process takes us, GE is committed to continue to support our business.”
Freeman said that GE still believes the appliance division remains an attractive buy.
The unit’s third-quarter revenues increased 10 percent from a year earlier — about double the industry average, Freeman said. GE Appliances also has recorded five straight quarters of growth. And this year will be its best since 2007.
Seth Martin, a spokesman for GE’s corporate office, told IL that the company maintains the appliance division is a great business — but it does not fit into GE’s plan to focus on being an infrastructure and technology company.
In recent months, he said, GE continued to change its business through sales and acquisitions, including the recently concluded purchase of Paris-based Alstom’s power and grid divisions.
“Appliances (are) a different kind of business,” Martin said.
Looking for another buyer
The company is restarting the process to sell the appliance division, Martin said, and is not currently in negotiations with a potential buyer.
Given the DoJ’s concerns about a Whirlpool-Electrolux duopoly, the buyer is unlikely to be Whirlpool. That leaves some smaller players, including companies mentioned frequently as competitors in the trial — Samsung and LG.
Whatever happens, Freeman said, GE will continue to make investments in the people, products and services of its appliance division.
“We can’t stand still,” she said. “We have to be relevant in the marketplace. We have to compete to win.”
Louisville Mayor Greg Fischer said the appliance division will remain an integral part of the community. “I have immense confidence that the team will continue to innovate, produce, and sell at the world class levels under the iconic GE brand,” the mayor said in a press release.
The local chamber of commerce, Greater Louisville Inc., said it was “disappointed” that the deal fell through.
“However, when you look at the revenue and share growth, as well as the success of new products introductions, it is clear that GE Appliances remains strong and will continue to be an important factor in their industry,” GLI CEO and President Kent Oyler said in a press release.
Electrolux said that while it is “disappointed,” it will continue to pursue its strategy “to grow profitably in promising segments, product categories and emerging markets.”