ELUXY AB Electrolux (PK)

By Jens Hansegard 

STOCKHOLM-- General Electric Co. has pulled the plug on the agreed $3.3 billion sale of its appliance business to Sweden's Electrolux AB, bowing to pressure from the U.S. Justice Department which wanted to block the transaction on antitrust grounds.

GE said it had terminated the sale, noting it was entitled to the $175 million breakup fee it had previously agreed with Electrolux in case the deal fell through.

"The appliances business is performing well and GE will continue to run the business while it pursues a sale," GE said.

The U.S. industrial giant is in the process of focusing its business on big-ticket industrial equipment like power turbines and aircraft engines.

The proposed transaction was in jeopardy since the summer, when the U.S. Department of Justice challenged it in court, saying a combination of the two appliance businesses would lead to "less competition, higher prices and fewer options for millions of Americans."

Though the Washington court handling the case had yet to render a verdict, GE used its right to terminate the sale agreement after 15 months of talks, Electrolux said.

Monday's decision by GE marks a setback for the Swedish white goods company which had hoped to create an appliance giant capable of rivaling with Whirlpool Corp. of the U.S. and Asian behemoths.

"We are disappointed but we are certainly not defeated," Elextrolux Chief Executive Officer Keith McLoughlin said in a conference call.

Mr. McLoughlin, a graduate of the U.S. Military Academy at West Point, said Electrolux would examine GE's demand to be paid $175 million in breakup fee.

"We are going to review the conditions under which it is payable," the CEO said.

With a strong balance sheet, Electrolux will continue to look for acquisitions, he said.

Shares in Electrolux plummeted on the Stockholm Exchange Monday, falling more than 12% in morning trading.

The proposed acquisition of the GE business, a leading supplier of kitchen equipment to U.S. homes, was announced on Sept. 8, 2014, but it became clear in recent months that the companies might struggle to get regulatory approval.

The Justice Department sued Electrolux and General Electric in July, arguing the transaction would have left consumers with few competitive options for cooking appliances. It said the deal would have harmed home builders and others who buy appliances in bulk, as well as budget-minded consumers who needed lower-priced ranges. The companies and the government had been battling in court for four weeks.

"This deal was bad for the millions of consumers who buy cooking appliances every year. Electrolux and General Electric could not overcome that reality at trial," Justice Department lawyer David Gelfand said in a statement.

The merged Electrolux-GE business would have had around a quarter of the U.S. market last year, compared with around 30% for Whirlpool, and 13% and 11% respectively for South Korean rivals LG Corp. and Samsung Electronics Co., according to data from TraQline.

Electrolux said that the settlement proposals it offered the Justice Department were reasonable and would have addressed competition concerns. "Unfortunately, these proposals were rejected," Electrolux said.

In his opening statement of the antitrust court proceedings that began a month ago, Justice Department lawyer Ethan Glass said competition between GE and Electrolux has benefited appliance consumers for a generation.

If the acquisition isn't stopped, Electrolux would two out of every three ranges sold in the U.S. and prices could rise by 5% or more, Mr. Glass said.

--Brent Kendall contributed to this article.

Write to Jens Hansegard at jens.hansegard@wsj.com

(END) Dow Jones Newswires

December 07, 2015 09:12 ET (14:12 GMT)

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