Electrolux’s $3.3bn deal to buy General Electric’s (GE) appliance business has fallen through, torpedoing the Swedish firm’s plan to bolster its US business and sending its shares down as much as 15%.
Announcing the deal with GE last year, the Swedish firm said its biggest ever acquisition would double its sales in the US and step up the challenge to Whirlpool in the world’s largest appliance market.
But the US justice department said the acquisition would reduce competition and drive up prices, and asked a federal court in July to stop it from going ahead.
Electrolux and the justice department were arguing in court when GE pulled the plug, leaving the Swedish firm’s US strategy in tatters.
The company’s shares fell 12.9% to 208.3 Swedish kronor (£16.17) on Monday afternoon, the biggest fall by a European blue-chip stock. Shares earlier touched a 14-month low of 203.2 kronor.
Electrolux said it would focus instead on developing existing brands such as Frigidaire, Kenmore and Tappan, and could look at other acquisitions.
However, analysts said neither would offer such a quick way to close the gap on its bigger rival Whirlpool, with some suggesting that chief executive Keith McLoughlin might leave.
“I’m not sure how much he will enjoy staying on now that what might have been his last deal won’t go through,” said Karri Rinta at Handelsbanken Capital Markets. “One would definitely have preferred for this deal to go through. Now it is somewhat back to square one.”
With his family having returned to the US several years ago, speculation has been rife that McLoughlin, who has been chief executive for almost five years and imported manufacturing practices from the motor industry to boost profitability, could soon leave.
However, McLoughlin said he remained committed to Electrolux and would continue as CEO.
“We’re disappointed but we’re certainly not defeated,” McLoughlin told a conference call. “It is a very large, global market that is growing, and we believe that Electrolux is well positioned to participate in that growth.”
He said the firm would “continue to have a strong, robust M&A (mergers and acquisitions) process”, without elaborating.
The acquisition of GE’s appliance business would have seen Electrolux leapfrog Whirlpool as the world’s biggest appliances maker, strengthening its position in North and South America.
In 2014, Electrolux made around 33% of its 112bn kronor of sales in North America with around 35% in Europe.
David Hallden at UBS said: “I think Electrolux should resist any temptation on acquisitions.”
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