GE has shifted emphasis from its traditional businesses like appliances to areas of higher technology such as clean energy and medical equipment.
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The two companies said GE Appliances would gain more access to the growing Chinese consumer market. While the boards of GE and Haier have approved the deal, it’s still subject to shareholder and regulatory approval, it said.
“Even if Haier doesn’t have a history of dumping prices in the United States, as for example LG and Samsung has, this is still an unknown player, a Chinese player”, DNB Bank ASA analyst Christer Magnergard told Reuters.
Previous major acquisitions have included 2013’s $7 billion purchase of Smithfield Foods by Shuanghui, and Lenovo buying IBM’s PC business for $1.75 billion. GE was seeking a suitor for the unit after an agreement with Electrolux AB collapsed because of opposition from the US Justice Department.
When General Electric’s $3.3 billion deal to sell its iconic appliances division to Swedish-based Electrolux soured, the industrial giant turned lemons into lemonade. The GE-Electrolux deal left unanswered questions about how many jobs would be left in Louisville, leading to concern among the local workforce.
Haier has struggled to gain more than a small foothold in the U.S. While it calls itself the biggest appliance maker in terms of unit sales, Haier is mainly known in the U.S. for niche products such as compact refrigerators and window air-conditioning units.
In 2014, revenue for GE Appliance was $5.9 billion with $400 million in EBITDA.
“The business’ integration into Haier, combined with Haier and GE’s lasting, comprehensive partnership, lays a solid foundation for Haier’s long-term growth”. In addition, WSJ also stated that the deal could be officially announced as early as Friday; however, the timings of the announcement could still fluctuate.
The Indian white goods market is dominated by the likes of LG, Samsung, Whirlpool, Godrej besides a host of other labels including Haier, Videocon and Electrolux.
Another drag on business is that fewer people in China are buying new homes and thus need fewer new appliances.
The deal with Haier is expected to close in mid-2016. On the other hand, China’s Haier Group seems eager to expand its operations in the United States market.
The transaction epitomises the changing nature of the global economy, with a 100-year-old U.S. company selling what was once one of its core units to a Chinese upstart that emerged from a refrigerator factory that was almost bankrupt 30 years ago.
“GE Appliances provides Haier with great products, state-of-the-art manufacturing facilities and a talented team”, Immelt continued.
While Louisville, Kentucky, will remain the appliances headquarters, GE hopes the decision will help it globally.
“Haier and GE share the same vision, and value innovation, customer service, and developing products of the highest quality”, Zhang Ruimin, Haier CEO, said in a statement.
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Kate Linebaugh contributed to this article.
