General Electric (GE) Pulls $3.3B Electrolux Sale after DOJ Opposition
Shares of the General Electric Company (GE) were trading down -0.13 or -0.43 percent to $30.36 in Monday’s premarket after news that the company was pulling its $3.3 billion deal to sell its appliance unit to Swedish appliance giant Electrolux. General Electric stock closed at $30.49, up +0.46 or +1.53 percent in Friday’s regular trading session.
Fairfield, Connecticut based General Electric is an American multinational conglomerate best known as a manufacturer of electrical appliances.
General Electric terminated the deal for Electrolux to buy its appliance business for $3.3 billion early this morning. The Swedish company had first bid on GE’s appliance unit on September 8th of 2014. Had the deal proceeded as planned, Electrolux would have captured 40 percent of the U.S. appliance market. The U.S. Department of Justice sued General Electric and Electrolux on July 1st of 2015 to stop the proposed acquisition.
Stockholm based Electrolux own the Tappan, Kenmore and Frigidaire appliance brands and according to the U.S. Department of Justice, the company’s purchase of the General Electric appliance business would reduce competition for kitchen appliances. Officials pointed out that two thirds of all kitchen ranges sold in the United States would be made by Electrolux if the deal went through.
The DOJ said that after the Electrolux acquisition, prices for kitchen appliances would increase by five percent in the United States. The DOJ asked a federal court to stop the acquisition when it entered its litigation in July. Nevertheless, Electrolux argued that U.S. regulators had already approved a similar deal between Whirlpool (WHR) and Maytag in 2006.
Court proceedings in the DOJ lawsuit were still pending when GE terminated the agreement after Electrolux had offered settlement proposals to address the agency’s concerns over competition. Nevertheless, the proposals were rejected by the DOJ after considerable efforts by Electrolux to gain regulatory approval.
Keith McLoughlin, President and Chief Executive Officer of Electrolux said in the company’s press release that, “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.”
Electrolux will now have to pay General Electric a termination fee of $175 million after already having spent more than $47.3 million so far this year on the deal and will have another approximately $45 million in costs related to the termination of the deal during the company’s fourth quarter. GE stock is down a fraction on the news, but Electrolux stock was pummeled, down over -10 percent in European trading.
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