[LONDON] Electrolux fell the most in more than four years after General Electric abandoned plans to sell its appliance business to the Swedish manufacturer for about US$3.3 billion because of opposition from US antitrust regulators.
"The worst possible outcome became a reality," DNB Bank analysts including Christer Magnergard wrote in a note published Monday.
"Electrolux can no longer pursue what would have been the largest transaction in its history - a significant loss for the company."
Electrolux needed the GE deal to gain scale in the key US market and had decided to go to court to fight the US Justice Department's claims that the combined company and rival Whirlpool Corp would be overly dominant in the US cooking-appliance market. The deal was first announced in September 2014 and a judge began hearing arguments from both sides at a trial that began last month in Washington.
Electrolux shares fell as much as 15 per cent, the most since July 19, 2011, and were trading down 12 per cent to 210.80 kronor as of 10.56 am in Stockholm.
"We're disappointed and regret GE has taken this decision," Electrolux chief executive officer Keith McLoughlin said on a conference call. "Both companies have worked hard to get this thing done. We both knew this would be a difficult case. We're disappointed, but certainly not defeated." GE has requested to be paid a US$175 million break up fee, both companies said.
Electrolux said costs of 402 million kronor (S$66 million) tied to the deal have been incurred in the first nine months of the year, according to a statement. In the fourth quarter, transaction costs and integration costs would be about 175 million kronor while results for that period would also be hit by costs of about 225 million kronor from a bridge loan facility.
"The government took a very static unreal view of what is clearly a dynamic and competitive market," Mr McLoughlin said on the call.
GE "felt like it was best to move on and explore other options for the business."
At the trial, Electrolux argued it would be able to keep costs down and sell ovens and other products at lower prices to consumers. Mr McLoughlin said on the witness stand that the takeover was "critical" to its ability to compete in the future. In contrast, the government said the Electrolux-GE combination and Whirlpool would make an unacceptably-high 88 per cent of cooking ranges sold in the US
The Electrolux CEO said Monday that the judge for the trial has been informed that the agreement has been terminated.
Electrolux should now look for joint ventures in China although "it should take a couple of months to digest this defeat," the DNB analysts wrote in the note. They estimate the costs related to the failed deal amount to 6.6 kronor a share.
"If we see a larger more transformative play as part of the portfolio we certainly would look at that," Mr McLoughlin said on the call.
GE will seek an alternative buyer for the appliance division, which is "performing well," the Fairfield, Connecticut-based company said in a statement.