Swedish consumer appliance company Electrolux announced its plan to buy GE Appliances for $3.3 billion. GE, parent company of GE Appliance, is probably breathing a great big sigh of relief.
GE is a very large company with subsidiaries in aviation, oil and gas with net profit margins in excess of 15 percent, whereas its appliance division is only making around 5 percent.
“Relatively speaking, it’s been neglected for years and financial performance has been poor,” says Brian Langenberg, principal at Langenberg & Company. “General electric is selling it for at least a third less than what they should be selling it for; they just want out.”
Electrolux, on the other hand, is getting a deal.
“It gets them into the American market, which is a market where they haven’t been much of a factor,” says Erik Gordon, professor of business law at the Ross School of Business at the University of Michigan. “That’s important because the American market is growing at 6, 7, 8 percent, but Electrolux’s main market, Europe, is not growing at all; less than 1 percent.”
Electrolux also gets a 48 percent stake in Mexican appliance company Mabe, extending its reach in North America even further.
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