On Wednesday, less than one month after first reporting General Electric (NYSE:GE) was in talks to sell its household appliance business, Bloomberg reported that Sweden's Electrolux (OTCPK:ELUXY) and consumer-product start-up Quirky Inc. are potential buyers. Valuation is said to be in the $2 billion range. Electrolux is the "traditional" favorite, already a global leader in appliances, and number two in the US (behind Whirlpool and ahead of GE; per research firm Statista). Last November, GE invested $30 million in New York-based Quirky as part of an initiative to build smart-home devices, such as a smartphone controlled air conditioner. GE would likely hold a minority-stake in a Quirky deal, which would also involve private-equity firms. In 2008, GE hired Goldman Sachs to sell the century-old appliance division, but was not able to generate an acceptable bid. The divestiture is part of GE's strategy to focus on high-value, industrial businesses and follows the company's successful spin-out of its consumer finance business, Synchrony Financial (NYSE:SYF) last month.
The sale of the appliance business was contemplated in my most recent article on GE, "Why I Decided To Buy General Electric". The action is consistent with GE's strategy of focusing on businesses with high barriers to entry, which are technologically sophisticated and are pseudo-oligopolies. The price of $2 billion is also in range with what was previously estimated in my article, "Update: General Electric Wants To Sell Its White (Elephant) Goods Business".
As moving closer to the sale of the appliance business is consistent with GE's strategy, I continue to feel GE is a "Buy". GE's focus on being a purer-play, global industrial firm, with a focus on products and markets where it can command premium prices and margins is a winner. GE's CEO, Jeff Immelt, is executing his vision, which includes selling non-core assets such as the appliance and consumer finance divisions. The company continues to sell at a reasonable valuation, and is expected to increase its dividend later this year.
Disclaimer: This article reflects the personal opinions of the author and should not be relied upon as the basis of an investment decision. Investors should always conduct their own due diligence prior to making an investment decision.
Disclosure: The author is long GE, SYF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.