ELUXY AB Electrolux (PK)

By Dominic Chopping 

STOCKHOLM--Sweden's Electrolux AB faces a complex strategic challenge following General Electric Co.'s decision to sell its appliances business to a Chinese company: how to counter the onslaught of Asian appliance makers in its traditional Western markets while conquering positions in emerging countries.

Electrolux recently saw its own $3.3 billion bid for the unit fail as GE pulled the plug following protracted legal wrangles with U.S. antitrust authorities. Chief Executive Keith McLoughlin has stepped down and rubbing salt into the wound for the Swedish company was a $175 million breakup fee it has had to pay GE.

Now, a little over a month later, China's Haier Group has stepped in with a $5.4 billion offer as it looks to expand its global reach and gain a stronger foothold in the U.S., a market where Electrolux had been eager to bulk up.

Pareto Securities analyst David Jacobsson Cederberg said Haier's acquisition will bring further competitive pressure to the North American market at a time when growth prospects in emerging markets are petering out.

"Their previously announced strategy was to focus on expansion in emerging markets, but the landscape has changed and emerging markets aren't that attractive anymore," he said. "I'm not sure shareholders would be too appreciative of emerging market acquisitions now."

The appointment of new Chief Executive Jonas Samuelson, who replaces Mr. McLoughlin at Electrolux from next month, could help the company focus on profitability, said Johan Eliason, analyst at Kepler Cheuvreux.

"As chief operating officer, he was behind the major modularization program that yielded significant costs benefits, and he has also been in charge of the restructuring of European operations, which are currently showing strong earnings recovery," Mr. Eliason said in a research note.

Electrolux generated around 35% of its major appliances sales in North America during 2014, compared with just 9% in the Asia Pacific region. Europe, Middle East and Africa accounted for 35% while Latin America made up 21%.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

January 15, 2016 10:15 ET (15:15 GMT)

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