May 28, 2008 / 10:12 AM / 10 years ago

UPDATE 3-GE names LG, others as contenders for appliance unit

(Adds Immelt comments in Beijing)

By Marie-France Han and Kirby Chien

SEOUL/BEIJING, May 28 (Reuters) - General Electric (GE.N) on Wednesday named South Korea’s LG Electronics (066570.KS) as a contender to buy its appliance business, which is valued at $4-$8 billion, along with China’s Haier Electronics Group Co Ltd, Mexico’s Controladora Mabe and Turkey’s Arcelik.

Major Asian appliance makers have been cited as likely suitors since GE, the second-largest U.S. company by market value, said earlier this month it may part with its century-old appliances unit, which had sales of $7.2 billion last year.

“The players have become somewhat obvious,” GE Chief Executive Jeff Immelt told reporters while visiting South Korea. “It is Haier (1169.HK) in China, it is LG in Korea, it’s Mabe in Mexico, it’s Arcelik (ARCLK.IS) in Turkey.”

Immelt later flew to Beijing, where he mentioned another possible contender — Sweden’s Electrolux (ELUXb.ST), the world’s second-biggest home appliances maker.

“Whether LG or Haier or Electrolux or others participate remains to be seen,” he said.

“The appliance process is still very early on, and much still has to be decided,” Immelt told reporters in the Chinese capital.

In Seoul, he said LG was “clearly one of the leading candidates”.

“They are a great company. They already have a presence in the U.S. Strategically, there are many things to be admired about a combination of LG and GE Appliances,” he said.

“It will be very intriguing to see what happens,” Immelt added. “It will fill lots of newspaper articles ... for the next 6-9 months.”

Immelt has said GE could close a sale of the unit, which ranks behind only Whirlpool Corp (WHR.N) in the United States, by 2009.

QUESTION OF CASH

LG shares closed 3.6 percent lower, compared with a 1.1 percent decline in the main KOSPI share index .KS11 as investors digested the prospect of a big acquisition.

In a statement to the Korea Stock Exchange, LG said it had not yet decided whether to bid for the GE unit.

Analysts queried what LG would get from buying the appliance unit, one strand in a web of GE businesses ranging from jet engines to commercial lending.

“I doubt LG Elec would be interested in pursuing this deal, since there’s little the company can gain. There’s a lot of overlap between the businesses with little premium potential for LG,” said Steve Lee, an analyst at Goodmorning Shinhan Securities.

Lee said Immelt’s comments could be aimed at drumming up interest from a small pool of potential candidates with deep-enough pockets to buy the business.

James Kim, a Lehman Brothers analyst, said LG did not have enough cash to fund a purchase and would not stand to benefit from GE’s brand equity.

“According to our channel checks, GE and LGE have not talked about this potential acquisition,” he said

But he said LG could be interested in buying a commercial air-conditioner maker or built-in appliance manufacturer with strong distribution channels. So LG could be a potential buyer if GE decided to sell parts of the division separately.

On the surface, the GE unit fits the bill for Asian manufacturers looking for a well-known brand in the United States.

Besides Haier and LG, South Korea’s Samsung Electronics Co Ltd and Italy’s Indesit Co SpA have been touted as possible bidders, but neither has confirmed an interest.

A spokeswoman for Arcelik (ARCLK.IS) said the Turkish white-goods maker would not be making a statement at this stage. ($1=1045.7 Won) (Additional reporting by Jon Herskovitz and Park Jung-youn in Seoul and Asli Kandemir in Istanbul; Editing by Keiron Henderson, Jonathan Hopfner, Ian Geoghegan and Alan Wheatley)

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