China’s Midea makes preliminary approach to take over Electrolux

MIDEA Group is exploring a potential acquisition of Electrolux, said people familiar with the matter, a bold move by the Chinese home appliance giant to add the higher-end luxury Swedish brand despite potential political opposition.

Midea made a preliminary approach in recent weeks to the white-goods manufacturer about a possible transaction, said the sources, who asked not to be identified because discussions are private. Electrolux has so far not been receptive to the proposal, some of the sources said.

Midea has been interested in Electrolux for some time and would only want a friendly deal, the sources said. Other Asian appliance makers including Samsung Electronics have also looked at the Swedish business, the sources added.

Stockholm-based Electrolux’s B shares jumped almost 16 per cent last Friday (Apr 28) on better-than-expected earnings, giving it a market capitalisation of US$4.3 billion. Midea shares are up about 10 per cent this year, valuing it around US$58 billion.

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 would not 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’s home appliance unit in 2016. It acquired German robot maker Kuka a year later, which triggered concerns in the German government.

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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’s white goods unit, which was sold to Chinese competitor Haier Group. Turkey’s Arcelik, which did a European deal with Whirlpool this year, is also a competitor.

Midea and Electrolux already have some partnerships, and in 2018 they launched the high-end AEG brand in China together. 

A spokesperson for Electrolux declined to comment, while representatives for Midea and Samsung could n’t be immediately reached for comment outside usual business hours. 

Key to any deal would be getting the support from the billionaire Wallenberg family’s Investor, the biggest shareholder in Electrolux. There was speculation in February about Midea’s potential interest.

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. BLOOMBERG