The Embraco compressor business of Whirlpool will be sold to Nidec Corporation in a cash deal that would be worth of $1.08 billion, the companies announced recently. It is expected that the deal would be closed by the first half 2019.

“We are proud of our strong portfolio of global consumer brands. Since Embraco operates in the business-to-business space, this transaction enhances our strategic focus on investing in and growing our consumer-facing business,” said Marc Bitzer, chief executive officer of Whirlpool Corporation.

“The planned tender offer further demonstrates our commitment to returning capital to shareholders, consistent with our balanced capital allocation strategy.”

Whirlpool has been running the Embraco business since 1977 and is headquartered in Brazil. There are eight global manufacturing facilities in Brazil, Italy, China, Slovakia and Mexico of the company which employs about 11,000 people. There are also commercial offices of the company in the United States and Russia.

Currently, Whirlpool includes its Embraco business as a part of its Latin American business in financial reporting. Embraco generated about $1.3 billion to Whirlpool’s net sales in the fiscal year 2017.

Whirlpool does not expect to have any material impact on its 2018 financial results because of the deal.

The company had earlier announced that it is anticipating halting of its operations and production at the Italy facility of Embraco which through a separate agreement with local authorities and unions. Hence, the Italy facility will not be a part of the deal.

“Nidec has been a trusted supplier for decades, and we look forward to building on that relationship in the future,” said João Carlos Brega, president of Whirlpool Latin America. “Embraco will continue to be a highly-valued supplier to Whirlpool, and we expect Embraco’s customers and employees to thrive under Nidec’s ownership in the future.”

In another announcement, Whirlpool Corporation said that it plans to launch a “modified Dutch Auction” tender offer of a value of up to $1 billion of its common stock where the anticipated price per share will not be less than $150 but not higher than $170 depending on market conditions.

Whirlpool has also announced that it has bene able to garner committed financing of an amount that is about the same as the net proceeds that would be generated form the Embraco deal and additionally, it will be in line with the balanced approach to capital allocation that has been adopted by the company.  It plans to make use of the money thus generated for the financing of the tender offer according to the current repurchase authorization program of the company. After the Embraco deal is over, Whirlpool is expecting to be easily able to repay the debt that it is incurring for the tender with the help of the money that would be generated from the deal.

The company also wants to conduct open market share repurchases throughout 2018 whenever the opportunity arises following the completion of the tender offer.

(Adapted from PRNewswire.com)

Categories: Economy & Finance, Strategy, Sustainability, Uncategorized