Swedish appliance manufacturer Electrolux had their plans to purchase GE Appliance temporarily halted as the Department of Justice antitrust investigators filed suit alleging such a merger would hurt competition. In a 15-page formal complaint filed effectively blocking the $3.3 billion acquisition of GE Appliance, DOJ noted the deal would unnecessarily increase prices on cooking appliances for U.S. consumers.
The deal, first mentioned by Electrolux in 2014, would've created an immediate control of home appliances - specifically ranges - controlled by the multi-billion dollar corporation based in Stockholm. Company representatives believe the merger with GE Appliance would create better competition and more competitive consumer deals, and promises to fight the DOJ's suit with diligence. General Electric, headquartered in Fairfield, Connecticut, will join forces with Electrolux in defending the deal.
DOJ's main area of concern involves contract supply chains, where GE Appliance sells directly to home builders, government entities, and apartment communities. Since Electrolux hasn't been particularly competitive in that sector of business, acquiring GE Appliance would immediately merge them with their competition as opposed to losing business to them. With Asian home appliance producers like Samsung and LG quickly capturing market share, the merger would keep GE Appliance competitive in South American, North American, European, and Asian markets. GE CEO Jeff Immelt is aggressively pushing for larger projects such as aircraft engines and locomotives, which are areas infrequently noticed by Asian electronics producers.
Currently, Electrolux ranks second worldwide behind Whirlpool in home appliances. The acquisition of GE Appliance would be the largest ever for Electrolux, but while Whirlpool's purchase of Maytag in 2006 was approved by DOJ regulators under similar pretenses, Electrolux's proposed purchase raised immediate red flags. An attorney for Electrolux believes the Justice Department's figures aren't congruent with potential outcomes, and will argue that mergers from the past cannot compare to the competitive consumer electronics realm today. A judge in the U.S. District Court in Washington, D.C. will hear the suit filed on Wednesday.
GE Appliance's sale isn't the only DOJ block in recent history. Comcast had their merger with Time Warner halted, and Sysco watched their lucrative sale to U.S. Foods blocked. Comcast eventually ditched their plans to purchase Time Warner due to an FCC snafu, and recently Charter Communications finalized their $56.7 billion deal with Time Warner. GE's appliance sector sale is one of several divestitures the American corporation will offload to realign the company for future growth, having recently sold their European PEU to leading Japanese trading consortium Sumitomo.
Shares of GE (GE) ended Wednesday trading up.38 percent to $26.67, while Electrolux (ELUXB) jumped 1.31 percent to $263.20.
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