Electrolux CEO seeks to rescue GE deal after legal blow

[July 02, 2015]  STOCKHOLM (Reuters) - Buying only parts of the GE Appliances business would not make sense, the head of Sweden's Electrolux  said on Thursday, fighting to salvage a $3.3 billion deal after the United States moved to block it. 

The U.S. Justice Department filed a lawsuit on Wednesday to stop the Swedish company from buying General Electric Co's <GE.N> appliance unit, saying a deal that has underpinned gains in Electrolux shares since it was announced last September would hurt competition.

"I don't see a scenario where, for either party, it would make much sense to split the baby," Electrolux Chief Executive Keith McLoughlin said.

He remained confident that the deal could still be completed by the end of the year, even though talks on remedies with the Department of Justice (DOJ) had so far been unsuccessful.

"We are still open to discussions and we hope that they are," he said in a conference call with analysts and media, but gave no details on what concessions could be made to save the deal or say if it might sell GE assets after it had been finalised.
 

In its complaint, the Justice Department said the deal would create a duopoly in the supply of major cooking appliances to buyers such as home builders and property managers. Electrolux, GE and rival Whirlpool had a combined market share of 90 percent in this segment, it said.

"We don't agree with their numbers and we will show numbers that are different than that," said McLoughlin, whose company manufactures appliances under brands such as Frigidaire, Kenmore and Tappan.

The deal would be the biggest in the Swedish company's history and double its annual sales in North America.

Electrolux shares were down 11 percent by 0950 GMT (5:50 a.m. EDT) on concern over whether the deal would go through.

"I would say it has become substantially more difficult. But to estimate the outcome of it in percent - that is hard. But this is a substantial change," said Erik Penser analyst Johan Dahl.

"The share has gained a lot during the last year on this (deal) being on the cards. So this is tough on them."

At times sounding exasperated, McLoughlin said the DOJ had failed to grasp how much more competitive his industry had become in recent years with inroads made by Asian rivals.

"I think it was difficult for them to get the nuances of how the business actually works, in general and also of the competitiveness of this industry -- I don't think they got that at all."

McLoughlin, an American and one of the few foreign CEOs at a Swedish blue chip firm, also poured cold water on a media report last week saying he would step down as its chief to return to the United States.

"To quote Mark Twain: the reports of my death have been greatly exaggerated," he said.

(Reporting by Sven Nordenstam and Niklas Pollard; additional reporting by Helena Soderpalm; Editing by Alistair Scrutton and Keith Weir)

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