US against GE unit sale to Electrolux
Companies vow to defend $3.3bn deal
WASHINGTON: The United States filed a lawsuit on Wednesday to stop Sweden’s Electrolux AB, which owns the Frigidaire, Kenmore and Tappan brands, from buying General Electric Co’s appliance business, the Justice Department said in a statement.
It said the $3.3 billion deal would hurt competition, and consumers, by combining two of the three top makers of stoves, cooktops and ovens. Whirlpool Corp, which bought Maytag in 2006, is the third.
GE, which also has the Hotpoint brand and sells almost exclusively in the United States, said in a statement that its goal remained to close the deal in 2015.
“Electrolux and GE intend to vigorously defend the proposed acquisition,” the company said in a statement.
In its complaint, the Justice Department said that Whirlpool, GE and Electrolux had 90% of the US market for stoves and ovens.
Leslie Overton, a deputy assistant attorney general at the Justice Department’s Antitrust Division, said the Electrolux deal would lead to higher prices for consumers.
“This lawsuit also seeks to prevent a duopoly in the sale of these major cooking appliances to builders and other commercial purchasers,” she added.
But Electrolux disagreed. Its antitrust attorney Joe Sims argued that LG Electronics Inc, Samsung Electronics Co Ltd and others were moving into the market to challenge the Big Three.
“There is absolutely no barrier of any kind to any other manufacturer participating,” he said.
Sims said that the company and Justice Department had been in settlement talks.
“We are rational and are therefore more than happy to come to a reasonable settlement if the DOJ (Justice Department) is. If not we’re just going to have to win in court,” said Sims, who said the deal could close by the end of the year.
The Justice Department has settled other major deal challenges, most notably a merger of American Airlines and US Airways and Anheuser-Busch InBev and Grupo Modelo, both in 2013.
But for the ones not settled, the Justice Department has been on a winning streak in court, stopping H&R Block from buying a rival company in 2011 and the Bazaarvoice deal for PowerReviews last year.
The Justice Department and Federal Communications Commission teamed up this year to stop Comcast Corp’s purchase of Time Warner Cable, while the Federal Trade Commission stopped a merger of big food distributors and challenged a second big merger this year.
GE’s move to sell off its appliances business is part of a shift the US conglomerate is making to sharpen its focus on manufacturing big-ticket industrial products such as jet engines and power turbines.
To that end, GE in April announced it would exit $200 billion worth of finance assets, while it is seeking to acquire the power equipment unit of France’s Alstom SA.
European regulators have expressed concerns that GE’s purchase of Alstom’s power unit would leave just two gas turbine companies in Europe, with GE only competing with Germany’s Siemens AG.
GE has been working on concessions to save the planned €12.4 billion ($13.7 billion) purchase, which would be the biggest in the US conglomerate’s history.
GE on Tuesday warned that the appliances sale would not close in the second quarter because of an ongoing regulatory review, and expected an after-tax gain of roughly five cents to seven cents per share should the deal close.
GE is expected to earn $1.29 per share this year, according to Thomson Reuters I/B/E/S.