China’s Midea is said to make takeover approach to Electrolux

Midea Group Co. is exploring a potential acquisition of Electrolux AB, according to people familiar with the matter, a bold move by the Chinese home appliance giant to add the higher-end luxury Swedish brand despite potential political opposition.
Midea made a preliminary approach in recent weeks to the white-goods manufacturer about a potential deal, said the people, who asked not to be identified because discussions are private. Electrolux has so far not been receptive to the proposal, some of the people said.
Midea has been interested in Electrolux for some time and would only want a friendly deal, the people said. Other Asian appliance makers have also looked at the Swedish business, the people added.

Electrolux’s B shares jumped almost 16% Friday on better-than-expected earnings, giving it a market capitalization of $4.3 billion. Midea shares are up about 10% this year, valuing it around $58 billion.

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 wouldn’t necessarily be deemed a national security risk.

Buying Electrolux would add to previous overseas acquisitions by Midea. The Chinese company bought a controlling stake in Toshiba Corp.’s home appliance unit in 2016 and acquired German robot maker Kuka AG a year later, which triggered concerns in the German government.

Midea Chairman Paul Fang hinted at interest in acquisitions in America and Europe in 2017 after the firm participated in the bidding for General Electric Co.’s white goods unit, which was sold to Chinese competitor Haier Group. Samsung Electronics Co. of Korea and Arçelik of Turkey, which did a European deal with Whirlpool Corp. this year, are other competitors.

Midea and Electrolux already have some partnerships, and in 2018 they launched the high-end AEG brand in China together.

Representatives for Midea, which is based in Foshan in southern China’s Guangdong province, and Electrolux, in Stockholm, couldn’t be immediately reached for comment outside usual business hours.

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

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.