Electrolux AB rose as much as 10% in early trading on Tuesday on news the Swedish luxury home appliance maker has drawn a takeover approach from China’s Midea Group Co.
(Bloomberg) — Electrolux AB rose as much as 10% in early trading on Tuesday on news the Swedish luxury home appliance maker has drawn a takeover approach from China’s Midea Group Co.
The company’s B shares were up 3.2% at 9:45 a.m. in Stockholm, giving it a market value of roughly 45 billion Swedish kronor ($4.4 billion).
Bloomberg News reported on Sunday that home appliance giant Midea made a preliminary takeover approach in recent weeks. Electrolux has so far not been receptive to the proposal, according to people with knowledge of the matter, who asked not to be identified because discussions are private.
Midea has been interested in Electrolux for some time and would only want a friendly deal, the people said. Other Asian appliance makers including Samsung Electronics Co. have also looked at the Swedish business, the people added. Midea shares are up about 10% this year, valuing it around $58 billion.
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The deal would test the Chinese company’s ability to make foreign acquisitions amid growing protectionist measures in Europe and the US, even if dishwashers and refrigerators wouldn’t necessarily be deemed a national security risk.
Buying Electrolux would add to previous overseas acquisitions by Midea. The Chinese company, which is based in Foshan in Guangdong province, bought a controlling stake in Toshiba Corp.’s home appliance unit in 2016. It acquired German robot maker Kuka AG a year later, which triggered concerns in the German government.
Midea Chairman Paul Fang hinted at interest in acquisitions in America and Europe in 2017 after the firm participated in the bidding for General Electric Co.’s white goods unit, which was sold to Chinese competitor Haier Group. Turkey’s Arçelik, which did a European deal with Whirlpool Corp. this year, is also a competitor.
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Midea and Electrolux already have some partnerships, and in 2018 they launched the high-end AEG brand in China together.
Key to any deal would be getting the support from the billionaire Wallenberg family’s Investor AB, the biggest shareholder in Electrolux. There was speculation in February about Midea’s potential interest.
“For Midea, we still believe Electrolux could make an excellent addition to its business,” DNB Markets analyst Christer Magnergård wrote in a note. But it would be “politically challenging” for Investor to agree to a sale, “as well as unlikely from a timing perspective given the current relatively depressed share price, in combination with Investor’s circa 70-year ownership in the company.”
Spokespeople for Electrolux and Investor declined to comment, while representatives for Midea and Samsung couldn’t be immediately reached for comment outside usual business hours.
Electrolux is in the process of laying off 3,800 workers as it seeks to cut costs and turn around its North American business. It reported first-quarter earnings that were better than expected overall, but still showed a net loss, with analysts pointing to negative cash flow.
Midea’s net income in the first quarter increased 12% year on year to 8 billion yuan ($1.2 billion), the company said Friday. It also reported net income of 29.6 billion yuan last year, missing analyst estimates.
–With assistance from Christopher Jungstedt and Vinicy Chan.
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