General Electric said on Friday that it would sell its appliance business that is over a century old to Qingdao Haier Co from China at a price of $5.4 billion.
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At least four companies, including China’s Midea Group Co., submitted bids for GE’s appliances business this month, people familiar with the matter have said.
The deal, which will boost Haier’s presence in the United States, values the business at 10 times earnings before interest, taxes, depreciation, and amortization (EBITDA) in the last 12 months, GE said.
A almost $6 billion deal between GE and Haier could shake up the appliance business.
Haier held talks with GE in 2008 to buy the USA firm’s appliance unit. In a report issued on January 5, Barclays analyst Scott Davis maintained a Buy rating on GE, with a price target of $34, which implies an upside of 17.0% from current levels.
Selling its home appliance unit also gives GE the opportunity to focus on medical equipment and clean energy- areas that the conglomerate has been shifting towards, anyway.
GE said that the sale had been green-lighted by its board of directors and Haier, but remained subject to Haier shareholder and regulatory approval.
For almost 60 years, GE’s Appliance Park has been a fixture of the community and he expects that to continue for decades to come, Crockett said.
Pareto Securities analyst David Jacobsson Cederberg said Haier’s acquisition will bring further competitive pressure to the North American market at a time when growth prospects in emerging markets are petering out.
Haier Group Chairman and CEO Zhang Ruimin added: “Haier is committed to investing in the U.S”.
She said her constituents, many of whom work for GE Appliances, were excited to hear Haier was purchasing the business and aiming to keep the jobs in Louisville.
When GE announced plans to invest $150 million in its Louisville dishwasher plant in 2012, the company claimed the Appliance Park operation was the largest plastic injection molding facility in Kentucky, and the fourth-largest in the United States.
The unit also maintains a 48 percent equity stake in Mabe, the No. 1 majap maker in Mexico.
The two companies also announced a long-term strategic partnership to develop projects in industrial Internet, health care and advanced manufacturing.
Haier has an 8% share of the Chinese home appliance market, which includes refrigerators and washing machines, versus market leader Midea Group’s 17% share, according to research company Euromonitor International.
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In this March 20, 2014 photo, a sign with the Haier logo stands in front of the company’s headquarters in Qingdao in eastern China’s Shandong province.
