Electrolux CEO Faces Career-Defining Battle to Salvage GE DealMatthew Boyle
Keith McLoughlin received his education from America’s military academy at West Point. The Electrolux AB chief must now display his battle acumen after a U.S. lawsuit threw his $3.3 billion takeover of General Electric Co.’s appliance unit and his own job into doubt.
Brooklyn-born McLoughlin, 58, became the first non-Swede to run the maker of the Frigidaire brand in 2011, after distinguishing himself as head of its North American business by growing sales in a difficult market. Thursday he promised to salvage the GE acquisition by the end of the year, having said it would lay the foundation for more deals and to better compete with market leader Whirlpool Corp.
“The CEO’s job would certainly come under scrutiny if the deal doesn’t go through,” David Jacobsson Cederberg, an analyst at Pareto Securities, said by phone. “Scale is so important in this industry -- they need to be bigger in order to compete with the largest companies.”
Electrolux stock slumped as much as 11 percent in Stockholm Thursday, the steepest intraday drop since July 2011, on concern that the takeover may be imperiled. At about 235 kronor, the shares are still 19 percent higher than the closing price on the September day the deal was announced, showing the potential for the stock to fall further if the purchase fails.
In an interview last June, McLoughlin talked of how quickly the competitive landscape is changing for appliance makers, and the importance of gaining international heft.
“Most regional players are being pushed out,” said the former U.S. military intelligence officer. “It’s now a global game, and you need to be a global player.”
McLoughlin’s push into faster-growing markets like Latin America and Asia hasn’t played out so well, according to Jacobsson Cederberg, hurt by slowing economies and a slide in emerging-market currencies. The company generated 70 percent of its net sales last year from Europe and North America, the same share as in 2011. That prompted the CEO to pursue the GE deal.
The oft-moustachioed executive said Thursday he’s willing to fight U.S. antitrust officials to ensure he succeeds in concluding the acquisition before the end of the year. If it falls through, he would need to look for other, smaller targets in different countries, Jacobsson Cederberg said.
“There aren’t alternative targets of a similar size that Electrolux could pursue,” he said.
Failure to secure the purchase could also fuel speculation about McLoughlin’s future at the company. Dagens Industri reported on June 24 he was resigning, prompting a statement from the company the following day that he hadn’t quit.
Still, the denial wasn’t “strong confirmation that he will stay in the longer term,” said JPMorgan Chase & Co. analyst Andreas Willi.
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