Sweden’s Electrolux AB is near a deal to buy General Electric Co.’s iconic appliance business for more than $2.5-billion (U.S.), in a move that would significantly expand its reach in North America, people familiar with the matter said.
The companies are hammering out final terms of a deal and could announce their agreement as soon as next week, the people said on Thursday, asking not to be named because the matter is not public.
Shares of Electrolux turned higher on news of a possible deal, rising 3.6 per cent to 188.40 Swedish crowns and giving it a market capitalization of more than $8-billion.
Discussions are ongoing and could still take longer to finalize, the people cautioned. Representatives for GE and Electrolux declined to comment.
GE’s century-old household appliance business, which along with lighting generated $8.3-billion in 2013 revenue, could help the Swedish appliance manufacturer expand beyond its core European market where growth has trailed that of North America.
Electrolux, which sells under brands such as Frigidaire, AEG and Zanussi as well as its own name, is already the world’s second-largest home appliance maker after Whirlpool Corp.
GE had confirmed in August that it was evaluating strategic options for the home appliance business, including discussions with Electrolux and other interested parties.
With a price tag of more than $2.5-billion, Electrolux appears to be paying top dollar to win the asset. The GE business, which sells products under the GE Monogram, GE Cafe and Hotpoint brands, could be worth between $2-billion and $2.5-billion, people familiar with the matter have previously said.
The U.S. diversified conglomerate has revived efforts to divest the profitable, but low-margin unit as chief executive Jeffrey Immelt seeks to exit businesses where it is not a global leader and allocate resources to higher-growth businesses.
Fairfield, Conn.-based GE put the business up for sale in 2008 but talks fizzled out in the face of the global recession. Immelt instead opted to invest $1-billion in new factories and products to make the business more competitive.
Still, the unit is almost exclusively focused on the U.S. market and lacks global scale, and GE believes it could be more valuable when being part of a global appliances group such as Electrolux, said one person familiar with the divestiture plan.
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