Qingdao Haier will acquire GE Appliances business

In addition, Qingdao Haier, a Shanghai stock exchange listed company that is 41% owned by Haier, will acquire the GE Appliances 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 and the sharing of expertise and know-how will benefit their global consumers.

GE Appliances has more than 100 years of brand heritage, a loyal mid- to high-end customer base, a highly experienced and accomplished management team, a distinctive corporate culture, a strong white goods portfolio, an extensive self-owned logistics and distribution network in the North American market, and an established quality control system.

Mr. Zhang Ruimin, Chairman and CEO, Haier Group, commented: “This strategic alliance provides a new starting point for both Haier and GE and I am confident that this partnership will deliver enhanced value to the stakeholders of both companies. Furthermore, we share common goals that we hope to achieve together: enhancing the value of the Haier and GE brands and developing our employees by encouraging autonomous innovation and cooperation.”

Mr. Jeff Immelt, CEO, GE, commented: “We are pleased to be selling our Appliances business to Haier and to launch this new partnership. 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.”

The acquisition of GE Appliances is an important investment in expanding Haier’s presence in the U.S. and in the Western hemisphere. GE Appliances will remain headquartered in Louisville, Kentucky. 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. Haier is committed to investing in the continued growth of its U.S. business.

This transaction will create immediate and long-term value not only for the communities in which both companies operate, but also for employees, customers, business partners, and shareholders. Haier and GE Appliances will support and have access to consumers and suppliers in Haier’s and GE’s respective and complementary regions. In particular, this transaction will provide GE Appliances access to the demand for its high-quality products in the Chinese market and position the company for further international growth. Furthermore, by creating a larger, more global company, the transaction will provide increased opportunities for all employees.

Mr. Liang Haishan, Chairman, Qingdao Haier, commented:  “Qingdao Haier and GE Appliances are leading appliance businesses in the Eastern and Western hemispheres. The alliance of both parties will lead to a great deal of mutual benefit. Qingdao Haier and GE Appliances are highly complementary businesses, particularly in the areas of brand, market, product innovation, and supply chain and quality management. This coming together will further enhance both the Haier and GE brands. GE Appliances’ highly-experienced and successful management team will continue to guide the direction of the business and will be involved in the governing board. In addition, Qingdao Haier will provide support and employee development opportunities within our global operating platform. We benefit from KKR’s experience and extensive network, which have really added value to this acquisition.”

As part of the acquisition, GE will receive a cash consideration from Qingdao Haier of $5.4bn. 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% from levels two years ago.

The acquisition includes GE Appliances’ 48.4% 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).  

Qingdao Haier expects the transaction to be accretive to EPS in the beginning of the first year post-closing. 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% of Qingdao Haier shares outstanding, are fully supportive of the transaction. 

“GE’s Appliances business has significant strategic value for Haier. The business’ integration in to Haier, combined with Haier and GE’s lasting, comprehensive partnership, lays a solid foundation for Haier’s long-term growth. We fully support Haier’s management team and are pleased to contribute to the company’s ongoing success. The completion of this transaction and the cooperation between Haier and GE will bring Haier to its next stage of development,” said David Liu, Director of Qingdao Haier, Co-Head of KKR Asia Private Equity and CEO of KKR China.