I.
Provide a detailed overview of the scenario, including the parties involved, the history,
and the specifics of the deal.
The Parties involves were Electrolux and GE Appliances. Electrolux is a Swedish
Multinational home appliance manufacturer headquartered in Stockholm (Electrolux, 2018). It is
consistently ranked the world’s second largest appliance maker by units sold after Whirlpool
(Gordon, 2010).GE Appliances is an appliance company headquartered in Louisville, Kentucky.
It is one of the largest appliance brands in the United States and manufacturers appliances under
the brands of GE, Profile, Cafe, Monogram, and Hotpoint (GE, 2018). On September 8, 2014,
after a 6-year sale process that included negotiations with Samsung Electronics and LG
Electronics, GE agreed to sell the company to Electrolux for US$3.3 billion in cash (Bray, 2014).
The deal carried a US$175 million termination fee clause if Electrolux was incapable to
complete the acquisition. The transaction was terminated in December 2015 after the United
States Department of Justice filed a lawsuit to block the deal on concerns that, along with
Whirlpool, the combined company would control 90% of the market for kitchen appliances sold
to home construction appliances (Mann & Hansegard, 2015). On June 6, 2016, Haier acquired
the company for $5.6 billion (Downs, 2016).
II. Calculate the total value of GE Appliances and Electrolux.
The total value = NPV of Net Operating Cash Flow + Interest in Mabe + Synergies
The total value = 3,175+ 480 +1,019 = $5,674
III. Using the projected seven-year valuation, calculate the range of values for GE
Appliances.
No TV, No CAPEX, No TV, No CAPEX,
Growth rate No NWC NWC TV, CAPEX, NWC
Less than -1.00% -80 -12 -3,863
-1.00% - 0.00% 524 563 -2,102
0.00% - 1.00% 984 1,158 -249
1.00% -2.00% 1,800 1,776 1,700
2.00% - 3.00% 2,475 2,416 3,752
3.00% - 4.00% 3,175 3.079 5,909
IV. In reference to the tables above, if you were presenting to senior management and had
to give one number for each final valuation, what would those numbers be, and how would
you arrive at the numbers? Explain your answers.
Cash flows will increase consistently over seven years based on the merger support
through the terminal values as the growth rate is expected to be between 3%-4% for years at
$5,909 based on the numbers. In retrospect, it is a decent investment from Electrolux
perspective. Many felt that the offer price of Electrolux is not exactly the actual value of the GE
appliances as it was offered $3.3 billion. The purpose of Electrolux merger was to take over the
market share and rival Whirlpool as it anticipated more sales and wanted strengthen its position
in North and South America
V. In the end, did the merger go through or not? Research the outcome and explain what
happened.
The merger did not go through due to U.S. antitrust regulators as well the U.S
Department of Justice concern that the deal would reduce competition and drive up prices
(Reuters, 2015). The U.S. Justice Department had filed a lawsuit asking a judge to stop the deal
from going ahead, arguing that it would push appliance prices up by 5 percent since Electrolux,
GE and larger competitor Whirlpool make up more than 90 percent of major kitchen appliances
sold to homebuilders, according to the lawsuit (Johnson, 2015). Before the GE deal was
announced, Electrolux was looking to buy into growth in emerging market as it wanted to double
its sales in the United States and step up the challenge to arch rival Whirlpool in the world's
largest appliance market (Reuters, 2015). As part of the transaction agreement, GE requested
Electrolux to pay out a termination fee of $175 million (Reuters, 2015). However, after the
lawsuit from the DOJ and months of opposition from U.S. antitrust regulators., GE withdrew
from the merger deal and exerted its contractual right to walk away from the transaction along
with a termination fee of $175 million.
References
Johnson, S. (2015, -12-07). GE calls off Electrolux appliance deal amid U.S. antitrust
fight. Reuters Retrieved from https://www.reuters.com/article/us-ge-equity-electrolux-
idUSKBN0TQ0MP20151207
Reuters. Electrolux’s $3.3B acquisition of GE appliances falls through. Retrieved
from https://www.cnbc.com/2015/12/07/ge-says-has-terminated-agreement-to-sell-
appliances-business-to-electrolux.html
Electrolux. (2018). Electrolux group. Retrieved from https://www.electroluxgroup.com/en/
Gordon, L. (2010, -12-03T09:33:26+00:00). Major appliances millionaires club - new 2010
company rankings. Retrieved from https://blog.euromonitor.com/major-appliances-
millionaires-club-new-2010-company-rankings/
GE. (2018). GE. Retrieved from https://www.geappliances.com/
Bray, C. (2014). In 2nd try, Electrolux reaches deal to buy G.E. appliances unit, for $3.3 billion.
Retrieved from https://dealbook.nytimes.com/2014/09/08/electrolux-to-buy-g-e-appliances-
business-for-3-3-billion/
Mann, T., & Hansegard, J. (2015, -12-07T17:54:00.000Z). GE terminates sale of appliances
business to electrolux. Wall Street Journal Retrieved from https://www.wsj.com/articles/ge-
terminates-sale-of-appliance-business-to-electrolux-1449474391
Downs, J. (2016). GE appliances sold to Haier. Retrieved from https://www.courier-
journal.com/story/news/local/2016/06/06/haier-execs-lville-ge-appliance-park-sale/85459922/
