Consumer Durables News

Home appliance makers Whirlpool, Arçelik to form Europe-focused entity

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U.S. home appliances maker Whirlpool is folding its European business into a new company controlled by Turkish rival Arçelik, reducing its exposure to a market where it had warned attractive profit margins could be some way off.

Whirlpool also said it had agreed to sell its Middle Eastern and African businesses to Arçelik, which the Turkish firm said was for 20 million euros ($21.65 million) in cash.

The moves come after Whirlpool launched a review of its Europe, Middle East and Africa (EMEA) operations in April 2022 and said it planned to focus on higher margin businesses.

Global firms have been cutting their European operations due to sluggish growth and high energy costs. Turkish exporters, meanwhile, have gained a competitive edge from a plunge in the country’s lira currency to record lows, making goods produced in Türkiye cheaper to overseas buyers.

“This allows us to participate in significant value creation from the repositioning of the business and cost synergies through our minority interest,” said Whirlpool Chief Executive Officer Marc Bitzer.

The new firm will include Arçelik’s European units, such as major domestic appliances, small domestic appliances and consumer electronics. Whirlpool will own 25% and Arçelik will own 75%, the U.S.-based company said on Tuesday.

Arçelik’s shares were up 5.1% at 10:55 a.m. GMT, after rising as much as 9.4% following the announcement.

“This new business will increase the competitiveness of Koç Group and Arçelik and create great value for both our country and our stakeholders,” said Levent Çakıroğlu, chief executive of Turkish conglomerate Koç Holding, which owns Arçelik.

“As the largest industrial conglomerate of Türkiye, we continue to strengthen our impact with global success stories ranging from the U.K. to India, from South Africa to the U.S. Today, Koç Group companies export to more than 150 countries. Arçelik, as a respected player in its industry, is carrying its vision and ambitions much further with this new standalone business. The opportunity for this business to deliver value to European consumers with market-leading products via trusted brands and a commitment to sustainability in the home is significant,” Çakıroğlu further said.

Fatih Kemal Ebiçlioğlu, Consumer Durables Group president of Koç Holding, also stated that Arçelik, a business at the forefront of its industry, is an outstanding example of a company pursuing a clear global vision within the Koç Group.

“This is a unique opportunity for two exceptional companies to come together with a focus on synergies, combined innovation, retail distribution and sustainability and is consistent with our stated strategy. With today’s agreement, we are creating a strong foundation to drive value creation for employees, shareholders and European consumers of white goods, extending Arçelik’s footprint with new growth opportunities in an important region,” Arçelik CEO Hakan Bulgurlu said.

The combined entity is expected to have annual sales of 6 billion euros and is likely to have more than 20,000 employees across multiple European countries.

Whirlpool will retain ownership of its EMEA KitchenAid unit, it said.

The U.S. firm said the Middle Eastern and African businesses being sold to Arçelik had sales of around $4.2 billion in 2021. The entirety of Whirlpool’s EMEA business reported sales of $5.01 billion last year.

The transactions will negatively impact Whirlpool’s full-year earnings per share by $26 to $28 on a GAAP accounting basis, the company said, adding it took a writedown of about $1.5 billion on its EMEA business in the fourth quarter.

The deals are expected to be completed in the second half of 2023, subject to regulatory approval, Arcelik said.

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