Chinese home appliance giant, Midea Group Co., has reportedly made a preliminary approach to acquire Electrolux AB, a Swedish luxury brand, according to sources familiar with the matter. Despite political opposition, Midea is keen to add the higher-end manufacturer to its portfolio, but Electrolux has so far not been receptive to the proposal.
Midea has had an interest in Electrolux for some time and would only pursue a friendly deal. Other Asian appliance makers, including Samsung Electronics Co., have also shown interest in the Swedish business. However, any potential deal would test Midea's ability to make foreign acquisitions amid growing protectionist measures in Europe and the US, even if dishwashers and refrigerators would not necessarily be deemed a national security risk.
Acquiring Electrolux would add to Midea's previous overseas acquisitions. The company bought a controlling stake in Toshiba Corp.'s home appliance unit in 2016, and a year later, it acquired German robot maker, Kuka AG, which raised concerns in the German government.
Midea Chairman, Paul Fang, hinted at interest in acquisitions in America and Europe in 2017 after participating in the bidding for General Electric Co.'s white goods unit, which was sold to Chinese competitor Haier Group. Turkey's Arçelik, which recently did a European deal with Whirlpool Corp., is also a competitor. Midea and Electrolux already have some partnerships, and in 2018, they launched the high-end AEG brand in China together.
Gaining the support of the Wallenberg family's Investor AB, the biggest shareholder in Electrolux, would be key to any deal. In February, there was speculation about Midea's potential interest. Electrolux is currently laying off 3,800 workers as it seeks to cut costs and turn around its North American business. The company reported better-than-expected first-quarter earnings overall but still showed a net loss, with analysts pointing to negative cash flow.