Electrolux has confirmed it is in talks to buy General Electric's – GE – home appliance business, following reports that the sale could fetch $2bn.
Bloomberg reported that GE had drawn interest from Electrolux and consumer product development start-up, Quirky Inc. Its sources said the potential sale of the century-old unit had come about as GE CEO Jeffrey Immelt 'focuses on industrial operations'. An official statement from Electrolux said: “There can be no assurances that an agreement will be reached.”
AB Electrolux (commonly known as Electrolux) is the Swedish multinational household and professional appliances manufacturer headquartered in Stockholm, Sweden. Year after year it is consistently ranked the world's second-largest appliance maker by units sold, after Whirlpool and has global domestic brands such as AEG, Electrolux, Frigidaire and Zanussi in addition to smaller, premium professional brands such as Dito, Kelvinator, Molteni in addition to Zanussi Professional, professional food preparation, cooking, ventilation refrigeration, and dishwashing equipment, all of which can be found in many commercial kitchens.
If the deal were to go through, with AB Electrolux’s acquisition of a significant consideration in the Thomas Edison founded giant, it would no doubt close the gap or see AB Electrolux come out in front, ahead of its closest rival in Whirlpool, the World's largest appliance maker by units sold.
MARKET UPDATE
By Katarina Gustafsson, Bloomberg News
STOCKHOLM — As Electrolux looks into purchasing the appliance business of General Electric, credit analysts say such a transaction may have dire consequences for the Swedish firm's credit profile."Electrolux was already close to a ratings downgrade, this accentuates even more the risk that the leverage is going to increase," Maxime Puget, an analyst at Standard & Poor's, said by phone. "If it's very high debt it could be more, but our main scenario today is a one-notch downgrade to BBB."
S&P put Electrolux on CreditWatch negative after the Stockholm-based company confirmed a report it was looking into the acquisition. That followed S&P's decision in October to cut Electrolux's outlook to negative. The appliance maker now faces a 50 percent risk of a downgrade, compared with a one-in-three probability before it revealed its interest in an acquisition.
If the deal goes ahead it "could materially increase" Electrolux's leverage, S&P said Aug. 18.