Aug. 30 (Bloomberg) -- Quirky Inc., a startup specializing in crowd-sourced development of small household products, is no longer pursuing General Electric Co.’s appliances unit, a person with knowledge of the matter said.
The closely held company had been considering making a bid, said the person, who asked not to be identified because the deliberations are private. New York-based Quirky had been in discussions to team with private-equity firms including Blackstone Group LP for an offer, another person had said.
Quirky’s exit removes an obstacle for Stockholm-based Electrolux AB, which has said it’s holding talks to acquire the century-old GE business. Electrolux, the second-biggest seller of appliances in the U.S., is seeking to boost revenue in Europe and the U.S. after several years of stagnant sales.
“This would be a fantastic deal for Electrolux” as long as the price doesn’t rise too high, said Nicklas Granath, who helps manage about $1 billion including Electrolux shares at Norron AB in Stockholm. “The U.S. is rebounding from the crisis faster and gaining market share there also helps keep out Asian manufacturers who may have put pressure on prices.”
GE, which began offering electric toasters in 1905, is selling the appliances division as Chief Executive Officer Jeffrey Immelt focuses on higher-margin industrial products. The unit could fetch at least $2 billion in a sale, people with knowledge of the deal have said.
Daniel Frykholm, a spokesman for Electrolux, declined to comment on Quirky’s decision to withdraw, as did Deirdre Latour, a spokeswoman for Fairfield, Connecticut-based GE. Christine Anderson, a spokeswoman for New York-based Blackstone, couldn’t immediately be reached for comment.
Electrolux reversed an earlier decline and rose 0.7 percent to 177.30 krona at the close in Stockholm yesterday, while GE slid 0.1 percent to $25.98 in New York.
Electrolux and Quirky emerged as potential purchasers for the appliance business earlier this month, when Bloomberg News reported that talks were under way with GE. While GE later said it was negotiating “with Electrolux and other interested parties,” Quirky never confirmed its involvement.
Quirky, which builds products based on ideas submitted by a community of online users, has co-developed several products with GE since last year, including an air conditioner controlled through a smartphone application. The five-year-old startup, run by 27-year-old Ben Kaufman, has 267 employees and said it expects sales of about $100 million in 2014.
In November, the startup received a $30 million investment from GE, part of $175 million raised from backers including Andreessen Horowitz. Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz.
The sale process is at least GE’s second attempt to offload the Louisville, Kentucky-based appliances division. In May 2008, GE said it hired Goldman Sachs Group Inc. to explore options, saying then that the unit was too tied to the tumultuous U.S. market and needed a broader focus. After the global financial crisis derailed the talks, Immelt opted to invest $1 billion to upgrade and expand the appliances unit.
The operations employ 12,000 people and brought in about $5.6 billion in revenue last year, according to the company. That was about 4 percent of GE’s sales.
Divesting the appliances business fits with GE’s strategy of focusing on more profitable units. Operating margins in the appliances and lighting division were less than 5 percent, trailing a figure of almost 16 percent for all of GE’s industrial operations.
Immelt has been reshaping GE around its industrial units since the 2008-09 credit crunch, when the finance arm threatened to drag down the parent company. He sold real estate holdings and stakes in foreign banks and exited NBCUniversal. The company conducted an initial public offering in July of GE Capital’s North American consumer-lending unit as part of a plan to eventually split off the rest of those operations.
Chief Financial Officer Jeff Bornstein said in an interview in July that GE plans to divest about $4 billion in nonfinancial businesses this year.
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