Electrolux tumbles as GE abandons deal

Electrolux shares tumbled after its $3.3bn deal to buy General Electric’s appliance business fell through.

The Swedish appliance manufacturer said on Monday that GE has terminated the agreement that was announced in September as a result of interference from the US Department of Justice, which sued Electrolux and GE to stop the proposed acquisition.

The US justice department argued that the deal would reduce competition for kitchen appliances, resulting in consumers paying 5% more for ranges and wall ovens. It also said the combination would mean two-thirds of all kitchen ranges sold in the US would be made by Electrolux.

Electrolux said it had made extensive efforts to obtain regulatory approvals, and regrets that GE has terminated the agreement while the court procedure was still pending.

Chief executive officer Keith McLoughlin said: “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.

“The strategy to grow profitably in promising segments, product categories and emerging markets remains.”

Under the transaction agreement, Electrolux is required to pay to GE a termination fee of $175m under certain circumstances and GE has requested pay-out of the amount.

“Clearly without the deal, there will be no need for a rights issue,” said RBC Capital Markets. “On our estimates, net debt/EBITDA will be around 0.8x at the end of 2015, dropping to 0.5x at the end of 2016, leaving scope for other acquisition opportunities, although clearly nothing on the same scale as the GE Appliances deal.”

At 1356 GMT, Electrolux shares were down 12.8% to SEK208.50.