Electrolux shares jump 10% on Chinese takeover approach

Home appliance giant Midea made a preliminary takeover approach in recent weeks, according to reports

Jonas Samuelson, president and chief executive at Electrolux.

Shares in Electrolux jumped as much as 10% on news the Swedish home appliance maker has attracted a takeover approach from China’s Midea Group.

It was reported home appliance giant Midea made a preliminary takeover approach in recent weeks. Electrolux has so far not been receptive to the proposal, according to people with knowledge of the matter. 

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. 

The Stockholm-based company has a market value of roughly €4bn, while Midea, whose shares are up about 10% this year, is valued at around €53bn.  

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.

Midea chairman Paul Fang hinted at interest in acquisitions in the US 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 Arçelik, 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.

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

“For Midea, we still believe Electrolux could make an excellent addition to its business,” DNB Markets analyst Christer Magnergård wrote in a research note. 

But it would be “politically challenging” for Investor to agree to a sale, “as well as unlikely from a timing perspective given the current relatively depressed share price, in combination with Investor’s circa 70-year ownership in the company”, he said. 

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.

Midea’s net income in the first quarter increased 12% year on year to €1.1bn. 

• Bloomberg