A little over a year ago I wrote about Electrolux’s agreement to buy GE’s appliance division this year.
In July the Department of Justice asked a federal court to stop Sweden’s Electrolux, which makes Frigidaire, Kenmore and Tappan appliances, from buying GE’s appliance business for $3.3 billion and has said the deal would push prices up by five percent.
Recent developments to the case has Electrolux AB seeking to retract notable testimony by its chief executive in the antitrust trial.
Under questioning from the Justice Department’s Steven Kramer, Electrolux Chief Executive Keith McLoughlin acknowledged that the company’s annual reports and other documents had repeatedly described the U.S. market for appliances as relatively consolidated compared to the more fragmented European market.
Pushed by Kramer to acknowledge that fewer players in a market would lead to less price competition, McLoughlin said: “Oh, my word, I haven’t said that at all.”
The Justice Department is focusing on lower end kitchen appliances, the type that home builders put in new houses and apartments or consumers buy at big box stores. Electrolux, GE and Whirlpool make up about 88 percent of the stoves and ovens sold to big builders and property managers. The Government maintains the combined company and Whirlpool Corp. would dominate the U.S. cooking appliances market, creating what’s known as a duopoly. The result for consumers, the government says, would be high prices for consumers.
Electrolux’s position is that price pressure in the appliance market protects customers. The Swedish appliance maker has also said the Justice Department’s opposition to the acquisition is “wholly inconsistent” with the government’s 2006 decision to approve Whirlpool’s acquisition of Iowa-based Maytag, a home and commercial appliance manufacturer.
“I’m convinced the only proposal, the only remedy, the government would find acceptable would be for Electrolux to essentially divest itself of its entire business in the United States,” said Joe Sims, an attorney for the Swedish company. “That obviously would not be a solution that would preserve the value of the transaction.”
Will Electrolux have to sell off Hotpoint or Monogram to make the deal go through or will a settlement be reached by the end of December? You can follow the trail U.S. v. Electrolux, 15-01039, U.S. District Court, District of Columbia (Washington) for more information.
On December 7th GE announced it terminated its agreement to sell their Appliances business to Electrolux and will now pursue other options. GE is entitled to a break-up fee of $175 million from Electrolux
Haier’s proposed $5.4 billion purchase of GE’s appliance business has passed a major hurdle, having received a thumb’s up from the U.S. Department of Justice. This bid followed a failed $3.3 billion buyout attempt by Sweden’s Electrolux