Texas consumers may have heard the recent announcement by Electrolux that
it was going to be purchasing General Electric's appliances division
for $3.3 billion. The goal of the cash purchase is to double sales in
North America and better compete with rival Whirlpool. Electrolux released
a statement saying GE's products were a compliment to its own iconic
brand. The statement also said that the purchase allows the company the
scale needed to innovate and grow.
Electrolux has several well-known brands on the market including Frigidaire,
AEG and Zanussi. Before this recent planned acquisition, Electrolux was
the second-largest home appliance maker behind Whirlpool and is most successful
in Europe where it saw 28 percent of its sales in 2013. Sales are expected
to grow in North America from $4.5 billion in 2013 to $9 billion after
the acquisition. Organic growth in 2013 was less than one percent in Europe
compared to 7 percent in North America.
The company estimates that it would save about $300 million per year. The
sale is being financed by a bridge loan facility that would be taken out
by an equity offering. GE's appliance business had earnings of $390
million in 2013 after interest, tax, depreciation and amortization were
taken into consideration.
Acquiring another company may help a business meet its overall strategic
goals. Buying another business may allow both companies to save money
and help the new combined company scale its operations. This may result
in lower prices for customers and better products as well. Any company
that is considering an
acquisition may wish to consult with a business law attorney who can assist in the
preparation of transactional documents and advise whether any regulatory
approvals will be required.
Source: The Huffington Post, "Electrolux Plans To Buy General Electric's Appliances Business For
$3.3 Billion", September 08, 2014