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GE wants to focus on manufacturing big-ticket industrial products such as jet engines and power turbines. Photo: AFP

US sues to stop Electrolux acquiring GE’s appliance business

The United States filed a lawsuit on Wednesday to stop Sweden’s Electrolux, which owns the Frigidaire, Kenmore and Tappan brands, from buying General Electric’s appliance business, the US Justice Department said.

It said the US$3.3 billion deal would hurt competition, and consumers, by combining two of the three top makers of stoves, cooktops and ovens. Whirlpool, which bought Maytag in 2006, is the third.

GE, which also has the Hotpoint brand and sells almost exclusively in the United States, said its goal remained to close the deal this year.

“Electrolux and GE intend to vigorously defend the proposed acquisition,” it said.

There is absolutely no barrier of any kind to any other manufacturer participating
Electrolux attorney Joe Sims 

In its complaint, the Justice Department said that Whirlpool, GE and Electrolux had 90 per cent of the US market for stoves and ovens.

Leslie Overton, a deputy assistant attorney general at the Justice Department’s antitrust division, said the Electrolux deal would lead to higher prices for consumers.

“This lawsuit also seeks to prevent a duopoly in the sale of these major cooking appliances to builders and other commercial purchasers,” she said.

But Electrolux disagreed. Its antitrust attorney Joe Sims argued that LG, Samsung and others were moving into the market to challenge the Big Three.

“There is absolutely no barrier of any kind to any other manufacturer participating,” he said.

Sims said that the company and Justice Department had been in settlement talks.

“We are rational and are therefore more than happy to come to a reasonable settlement if the DOJ (Justice Department) is,” he said. “If not we’re just going to have to win in court.”

The Justice Department has settled other major deal challenges, most notably a merger of American Airlines and US Airways and Anheuser-Busch InBev and Grupo Modelo, both in 2013.

It teamed up with the Federal Communications Commission this year to stop Comcast’s purchase of Time Warner Cable, while the Federal Trade Commission stopped a merger of big food distributors and challenged a second big merger this year.

GE’s move to sell off its appliances business is part of a shift the US conglomerate is making to sharpen its focus on manufacturing big-ticket industrial products such as jet engines and power turbines. To that end, GE in April announced it would exit US$200 billion worth of finance assets, while it is seeking to acquire the power equipment unit of France’s Alstom .

European regulators have expressed concerns that GE’s purchase of Alstom’s power unit would leave just two gas turbine companies in Europe, with GE only competing with Germany’s Siemens. GE has been working on concessions to save the planned ¤12.4 billion (HK$106.7 billion) purchase, which would be the biggest in the US conglomerate’s history.

GE warned on Tuesday that the appliances sale would not close in the second quarter because of an ongoing regulatory review, and said it expected an after-tax gain of roughly 5 US cents to 7 US cents per share should the deal close. GE is expected to earn US$1.29 per share this year, according to Thomson Reuters estimates.

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