General Electric Co. finally has an agreement to sell its appliances business — a unit that claims to be the fourth largest U.S. injection molder.
Chinese appliance major Quingdao Haier Co. Ltd. agreed to pay $5.4 billion for GE Appliances.
Haier has a long-term agreement to use the GE Appliance brand and Louisville, Ky., will remain the headquarters for the business. The companies expect to complete the deal in mid-2016, subject to regulatory approval.
“Haier has a stated focus to grow in the U.S., build their manufacturing presence here, and to invest further in the business,” GE Chairman and CEO Jeff Immelt said in a news release. “Innovation, new product introduction and brand management are fundamental to their overall strategy.”
Haier Group Chairman and CEO Zhang Ruimin added: “Haier is committed to investing in the U.S.” He said the two firms will explore opportunities for joint collaboration.
Beyond the appliance business agreement, GE and Haier said they are forming a long-term strategic partnership to look at cooperating in the areas of industrial Internet, health care and advanced manufacturing. GE also will help Haier improve its manufacturing efficiency.
GE has invested significantly in its massive Appliance Park operations in Louisville, and the operation has become one of the most frequently cited examples of reshoring manufacturing work to the United States.
When GE announced plans to invest $150 million in its Louisville dishwasher plant in 2012, the company claimed the Appliance Park operation was the largest plastic injection molding facility in Kentucky, and the fourth-largest in the United States.
GE said it was spending $1 billion to expand and modernize its Appliance Park, introducing lean manufacturing with an improved plant layout and ergonomics. The company hired a slate of engineers to oversee the overhaul.
GE had been trying to sell the appliance business since 2008 but the recession made it impossible for it to get the sale price it was looking for. It subsequently spent big money on GE Appliances to make it more attractive to future potential bidders.
Big multiple
The $5.4 billion price tag is about 10 times the unit's previous 12 months of earnings before interest, taxes, depreciation and amortization.
“GE Appliances is performing well and there was significant interest from potential buyers, helping drive a good deal which will benefit our investors, customers and employees,” Immelt said.
GE's Jan 15 announcement comes about five weeks after Swedish firm AB Electrolux revealed it was abandoning negotiations to buy GE Appliances.
Electrolux's negotiations were cut short when the U.S. Justice Department advised a federal court to halt a possible deal because of antitrust concerns. Electrolux is a major global appliance OEM and its North American operations are centered in large factories in Mexico.