General Electric (NYSE:GE) who once considered NBC Universal as its own is now shedding its appliances business and inching closer to making GE (NYSE:GE) a simpler and streamlined company that GE (NYSE:GE) executives promised years ago. On Monday morning, the company reported its $3 billion settlement regarding selling its appliance business to Electrolux (OTCMKTS: ELUXY), the Swedish multinational.
The Sweden based company which is the parent company of Eureka (ASX: EGH) and Frigidaire owns a big share of the market. Electrolux (OTCMKTS: ELUXY) decided to acquire the appliance businesses of GE (NYSE:GE) for about $3.3 billion and the deal will be closed around 2015 completing all regulatory approvals.
General Electric’s (NYSE:GE) appliance business that currently raked in about $5.7 billion revenue in the year 2013, may be beneficial in helping Electrolux (OTCMKTS: ELUXY) expand far beyond the European market.
Keith McLoughlin, the CEO of Electrolux (OTCMKTS: ELUXY), stated on Monday in an interview with CNBC that the appliance businesses all over the world are increasing in competition. He continued to say that it is vital for a firm to have large scale competitiveness over the globe so that it may compete. With GE (NYSE:GE) and Electrolux (OTCMKTS: ELUXY) striking this deal, both companies will increase their global competitiveness.
Both the appliance businesses sales and the Initial Public Offering ending in a spin-off of the Financial company Synchrony Finance, resulted in an extremely hectic summer for General Electric (NYSE:GE) which was aimed entirely to streamline and transform the company. Both in June and July, it also finished a bid amounting to $13.5 billion for the power and grid businesses of the French multinational Alstom (EPA: ALO).
CEO and chairman of General Electric (NYSE:GE) reported that the transaction was consistent with the firm’s strategy in being the world’s finest technology and infrastructure company. This strategy was one pillar of guidance in the synchronization which GE (NYSE:GE) dreams to attain in all of its businesses. He continued to say that they are creating somewhat of a brand new type of industrial company with a competitively positioned and balanced portfolio containing infrastructure businesses with advantages in growth markets, technology, driving outcomes for the customer and not to forget a simplification culture.
General Electric (NYSE:GE) expects its industrial businesses to make about 75% of its earnings before 2016. By this time, the estimate of the conglomerate shows that 60% of its earnings are derived from the industrial side. This proves that the industrial transaction will have beneficial outcomes for GE (NYSE:GE) making Electrolux (OTCMKTS: ELUXY) a good deal.
This deal with the Electrolux Company (OTCMKTS:ELUXY) values the General Electric (NYSE:GE) appliances at about 8 times the EBIDTA thus aiming to generate after-tax gains amounting to 5-7 cents/share for GE (NYSE:GE). Overall summarizing the analysis of the company, we understand that the deal will bring gains over the years after acquisition. This is one decision that may make the company recognize its dream. The news had a positive impact on the stock on Monday; its share price increased by 0.5%.