Headquarters will remain in Louisville
LOUISVILLE, Ky. (April 8, 2016) — Haier Group and General Electric today announced a Memorandum of Understanding to cooperate globally and jointly pursue growth projects in focus areas where both companies can increase business competitiveness such as Industrial internet, healthcare and advanced manufacturing.
In addition, Qingdao Haier Co., a Shanghai stock exchange listed company that is 41 percent owned by Haier, will acquire the GE Appliances business. GE Appliances will remain headquartered in Louisville. The business will continue to be operated independently under the direction of a local board with the participation of GE’s current senior management team, who will guide the strategy and operations of the business.
Qingdao Haier acquired all overseas operations of Haier Group in June 2015, as part of the expansion of Haier’s global business. The coming together of Qingdao Haier and GE Appliances will further enhance Qingdao Haier’s global competitiveness.
“We are pleased to be selling our Appliances business to Haier and to launch this new partnership,” said Jeff Immelt, CEO of GE. “Haier has a stated focus to grow in the U.S., build their manufacturing presence here, and to invest further in the business. Innovation, new product introduction, and brand management are fundamental to their overall strategy. GE Appliances provides Haier with great products, state-of-the-art manufacturing facilities, and a talented team. In addition, we see the opportunity to work together to build the GE brand in China.”
GE has nine manufacturing plants across five states in the U.S. and has built world-class logistics and distribution capabilities as well as strong customer relationships in both the retail and contract channels. In 2014, GE Appliances had approximately $5.9 billion in revenue and $0.4 billion in EBITDA. The company employs approximately 12,000 employees globally, 96 percent of whom are based in the U.S..
As part of the acquisition, GE will receive a cash consideration from Qingdao Haier of $5.4 billion. The transaction is structured primarily as an asset purchase. Net of certain expected benefits, the transaction value represents an 8.2x multiple based on GE Appliances’ estimated 2015 EBITDA, which was up nearly 50 percent from levels two years ago.
The acquisition includes GE Appliances’ 48.4 percent stake in Mabe, a Mexican appliance company that has operated a joint venture and has had a sourcing relationship with GE Appliances for 28 years.
As part of the transaction, under Qingdao Haier’s ownership, GE Appliances will continue to market the current portfolio of GE brands for a period of 40 years (inclusive of two 10-year extensions).
The transaction is subject to customary regulatory filings in China and customary anti-trust clearances in relevant countries. In addition, the transaction is subject to approval by two-thirds of Qingdao Haier shareholders present to vote. Haier Group and KKR, who together own 50.8 percent of Qingdao Haier shares outstanding, are fully supportive of the transaction.
The companies expect the transaction to close in mid-2016.