Electrolux Path to GE Appliance Deal Runs Into U.S. LawsuitRichard Clough
Electrolux AB is willing to fight U.S. antitrust officials to ensure it succeeds in concluding a $3.3 billion acquisition of General Electric Co.’s appliances division before the end of the year.
Lawyers for Electrolux said there is no justification for the lawsuit filed Wednesday by the Justice Department, which challenges the deal on the grounds that it would hurt consumers. The decision came after months of discussions between the government and the Stockholm-based company. Electrolux’s American depositary receipts fell 9 percent Wednesday, the most since August 2011.
“We would be perfectly willing to come to some acceptable accommodation with the division,” Joe Sims, an antitrust lawyer for Electrolux at Jones Day, said on call Wednesday. “We continue to be open to those discussions, but in the meantime, and until that situation changes, we are prepared to vigorously contest this transaction.”
Electrolux agreed in September to acquire the century-old GE unit in a deal that would put the Swedish company on par with industry leader Whirlpool Corp. in the U.S. Electrolux said when announcing the deal that it would pay a fee of $175 million in certain situations involving rejection from regulators.
Electrolux Chief Executive Officer Keith McLoughlin told analysts Thursday that reaching a settlement before going to court is a possibility. Electrolux and GE have both said they expect to close the deal by the end of the year. If the companies cannot come to an agreement with the Justice Department, they will go before a judge to make their case, Sims said Wednesday.
Proposing a settlement to resolve the government’s concerns would follow the example of brewer Anheuser-Busch InBev NV, which won approval to buy Grupo Modelo SAB in 2013 after being sued by the Justice Department.
Acquiring the GE unit would add brands such as Hotpoint to Electrolux’s lineup that includes AEG stoves and Frigidaire refrigerators as the Swedish company looks to boost revenue in Europe and the U.S. after several years of stagnant sales.
The deal could give Electrolux about a 40 percent share of the U.S. appliances market, according to 2013 data from research firm IBISWorld. Electrolux and Whirlpool together would have more than three-quarters of U.S. sales, the firm said. U.S. shipments of major home appliances rose 5.8 percent in the first five months of 2015, according to the Association of Home Appliance Manufacturers.
The Justice Department said in the complaint that the deal would leave consumers vulnerable to price increases and hurt competition in the retail market and so-called contract channel, where companies sell in bulk to homebuilders and property managers.
Electrolux disputed the arguments, saying Whirlpool’s 2006 acquisition of Maytag proved that the market can handle consolidation among large players. The U.S. in particular has become more open, with foreign companies such as LG Electronics Inc. and Samsung Electronics Co. gaining market share, Sims said. Dyson Ltd. also sells vacuums there.
“This is an effort to paint a picture that doesn’t exactly jibe with the facts,” he said. “The market is more competitive today than it was before the Whirlpool-Maytag transaction.”
The lawsuit is unusual in its relative lack of complaints from competitors and customers, said Nicholas Heymann, an analyst with William Blair & Co. “I don’t really know who’s objecting other than the Justice Department,” he said.
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