Electrolux Faces Strategic Challenge After GE's Deal With China's Haier
January 15 2016 - 9:30AM
Dow Jones News
By Dominic Chopping
STOCKHOLM--Sweden's Electrolux AB faces a complex strategic
challenge following General Electric Co.'s decision to sell its
appliances business to a Chinese company: how to counter the
onslaught of Asian appliance makers in its traditional Western
markets while conquering positions in emerging countries.
Electrolux recently saw its own $3.3 billion bid for the unit
fail as GE pulled the plug following protracted legal wrangles with
U.S. antitrust authorities. Chief Executive Keith McLoughlin has
stepped down and rubbing salt into the wound for the Swedish
company was a $175 million breakup fee it has had to pay GE.
Now, a little over a month later, China's Haier Group has
stepped in with a $5.4 billion offer as it looks to expand its
global reach and gain a stronger foothold in the U.S., a market
where Electrolux had been eager to bulk up.
Pareto Securities analyst David Jacobsson Cederberg said Haier's
acquisition will bring further competitive pressure to the North
American market at a time when growth prospects in emerging markets
are petering out.
"Their previously announced strategy was to focus on expansion
in emerging markets, but the landscape has changed and emerging
markets aren't that attractive anymore," he said. "I'm not sure
shareholders would be too appreciative of emerging market
acquisitions now."
The appointment of new Chief Executive Jonas Samuelson, who
replaces Mr. McLoughlin at Electrolux from next month, could help
the company focus on profitability, said Johan Eliason, analyst at
Kepler Cheuvreux.
"As chief operating officer, he was behind the major
modularization program that yielded significant costs benefits, and
he has also been in charge of the restructuring of European
operations, which are currently showing strong earnings recovery,"
Mr. Eliason said in a research note.
Electrolux generated around 35% of its major appliances sales in
North America during 2014, compared with just 9% in the Asia
Pacific region. Europe, Middle East and Africa accounted for 35%
while Latin America made up 21%.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
January 15, 2016 10:15 ET (15:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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