General Electric Company, one of the largest industrial names in the world, has been implementing its plans to divest businesses that generate less than 10% in margins. The management wants to focus on core industrial competencies and build on them. The company had already sold NBCU Universal to Comcast Corporation (CMCSA) in 2009, while its North American retail finance division had been spun off as Synchrony Financial (SYF), earlier in July.
Going forward, GE is aiming to focus more on businesses like Power & Water, Aviation, and Transportation which earn around 20% in operating margins. Segments GE want to get rid of include Home Appliances (6% of total revenues) and Lightning & Energy Management (7% of total revenues), which earn operating margins of around 4.57% and 1.4%, respectively.
Companies in focus to bid for GE’s home appliances division include Electrolux and Quirky Incorporation. Sweden’s Electrolux is one of the world’s largest manufacturers of home appliances and industrial equipment, with 2013 revenues totaling $15.9 billion.
Quirky Incorporation, a five-year old company, has already partnered with GE for the development of smart air-conditioners. GE’s $30 million investment in Quirky Incorporation makes it a more natural candidate for the acquisition of its home appliances division. Quirky is said to be interested in a majority stake in the division, for which it has already secured partnership with the Blackstone Group.
GE’s strategic decision to divest its appliances unit proves the competitiveness of Asian giants like LG Electronics Inc. (LGEAF) and Samsung Electronics Ltd (SSNLF) in the home appliances segment. GE now plans to focus on building and servicing large equipment such as aircraft engines, gas-fired turbines, and oil & gas drilling equipment.