Sweden's Electrolux said yesterday it would double US sales by paying $3.3bn (€2.55bn) in cash for General Electric's appliances business in its biggest ever deal, giving it the scale to go head-to-head with larger rival Whirlpool.
GE's century-old household appliance business, which had $5.7bn in 2013 revenue, could help the Swedish company expand beyond its core European market where growth has trailed that in North America.
Electrolux, the world's second-largest appliance maker by sales, will see its annual sales in North America more than double to over $10bn, similar in size to Whirlpool's sales there. It also gets to keep the iconic GE Appliance's brands.
"I think it's a historic event for Electrolux. I'm very excited about it," Electrolux chief executive Keith McLoughlin said.
"I think the fit - the strategic fit, the industrial logic - is compelling," Mr McLoughlin added.
While the price tag is higher than the $2.5bn figure people familiar with the deal suggested last week, analysts said the company was not overpaying. The deal includes GE's 48.4pc stake in Mexican appliances maker Mabe.
Electrolux said the price was 7 to 7.3 times GE Appliance's estimated 2014 earnings before tax, interest, depreciation and amortisation, based on an enterprise value (including debt) of $3.4bn, according to ThomsonReuters data.
Including expected annual cost savings of around $300m, the multiple paid for GE would be much lower at around five times EBITDA, Electrolux chief financial officer Tomas Eliasson told a conference call.
"If they manage to realise the synergies, it's clearly a good multiple," said Kepler Cheuvreux analyst Johan Eliason, adding the inclusion of the Mabe stake would strengthen Electrolux's position in Latin America on top of the clout it is gaining in North America.
The company plans a rights issue to raise about 25pc of the price after the deal's expected closing next year, Electrolux said.
Investor, the investment company founded by Sweden's Wallenberg family and owner of 15.5pc of Electrolux's capital, gave the deal and the right issue its stamp of approval.