General Electric Co. (NYSE: GE) agreed to sell its home-appliances business to China’s Qingdao Haier Co. for $5.4 billion after pulling out of a deal with Electrolux AB last month.
The new pact represents a significant premium over the $3.3 billion Electrolux agreement, which was canceled amid objections from U.S. antitrust regulators. Haier, one of several bidders in the latest round, paid 10 times the division’s earnings over the last year, GE said Friday in a statement.
“GE Appliances is performing well and there was significant interest from potential buyers, helping drive a good deal which will benefit our investors, customers and employees,” GE Chief Executive Officer Jeffrey Immelt said in the statement.
The quick turnaround from the failed Electrolux deal supports Immelt’s effort to reshape the Fairfield, Connecticut- based company around industrial-manufacturing operations. He’s selling the consumer-focused business that makes stoves, washing machines and microwave ovens -- along with the bulk of GE’s lending arm -- while expanding divisions making products such as gas turbines, oilfield equipment and jet engines. GE also recently announced plans to sell its headquarters. In August 2015, GE closed the sale of Antares Capital.
GE Appliances will keep its headquarters in Louisville, Kentucky, and continue to be run by its current management team. Shanghai-listed Qingdao Haier said it paid a premium for GE’s long history, brand value and supply chain. Under the agreement, Haier can continue using the GE brand for 40 years, including in China.
“Haier had always fancied themselves the GE of China so now they get the real thing,” Steven Winoker, an analyst at Sanford C. Bernstein & Co., said in a note.
The acquisition highlights Haier’s global ambitions. Already one of the world’s largest appliances makers, it wants to expand outside its own region and boost its 1.1 percent share of the U.S. market. The deal would be the largest Chinese purchase of an overseas electronics business, surpassing state- backed Tsinghua Holdings Co.’s plans for a $3.8 billion investment in Western Digital Corp. announced last year.
“It may be a step for the Chinese company to build up an international network while its overseas exposure now is still small,” Andrew Song, an analyst at Guotai Junan Securities Co., said of the deal with GE. “It’s also likely that they will have more synergy, as Haier is developing smart appliances.”
Haier has used international acquisitions to achieve quick expansion and to consolidate its overseas resources. The company bought control of New Zealand’s Fisher & Paykel Appliances Holdings Ltd. in 2012 and took over part of Sanyo Electric Co.’s washing-machine and refrigerator businesses from Panasonic in March to expand its presence in Southeast Asia.
At least four companies, including China’s Midea Group Co., submitted bids for GE’s appliances business this month, people familiar with the matter have said. The price was expected to be higher than what Electrolux would have paid in part because the business had improved over the past few years.
In 2008, before the aborted Electrolux agreement, GE said it would explore options to sell or spin off the appliances business, concerned that it was too heavily tied to the tumultuous U.S. market. That effort was stymied by the financial crisis.
The sale to Haier will generate an after-tax gain of about 20 cents a share after closing, which will be offset by restructuring costs, GE said.
-- Daniela Wei and Stephanie Wong contributed to this report