China’s Qingdao Haier Co Ltd has agreed to buy US industrial giant General Electric Co’s appliances business for $5.4 billion in cash to expand its international business, according to a press statement.
The deal also includes GE Appliances' 48.4 per cent stake in Mabe, a Mexican appliances company. The move comes a month after GE abandoned a $3.3-billion deal with Sweden's Electrolux due to opposition from US antitrust regulators.
The deal, which is so far the biggest by Haier and will boost its presence in the US, valued the business at 10 times earnings before interest, taxes, depreciation, and amortisation (EBITDA) in the last 12 months, GE said.
The appliances division had revenue of about $5.9 billion in 2014 and employs 12,000 people.
GE doesn't sell its appliances in India though some distributors offer its products after importing it on their own. The company earlier had a JV in India with Godrej that had come unstuck.
The Indian white goods market is dominated by the likes of LG, Samsung, Whirlpool and Godrej besides a host of other labels including Haier, Videocon and Electrolux.
Swedish appliance giant Electrolux has sold its Indian operations several years ago to Videocon and currently sells in the country through brand licensing pact.
Haier said it will continue to use the GE Appliances brand and retain its headquarters in Louisville, Kentucky along with its current management team.
The transaction, which is expected to close in mid-2016, has been approved by the boards of both GE and Haier, and remains subject to customary closing conditions, including approvals from Haier shareholders’ and regulators.
The two companies have also announced a long-term strategic partnership to explore cooperation in industrial internet, healthcare and advanced manufacturing.
This adds to a string of American or European electronics brands that were snapped by Chinese firms in the past decade such as Thomson and Alcatel (TCL), Motorola and IBM's PC unit (Lenovo). While Lenovo has made a success out of the deal, TCL has been struggling to justify the price it paid for the brand tags.
Haier's deal is the biggest of them all.
Goldman Sachs was GE's financial adviser and Sidley Austin LLP was its legal adviser.