The fate of Electroluxshould find a conclusion within the end of this week. More than rumors, it seems that we are dealing with news on an acceleration of contacts between the colleges of financial advisors of the Swedish multinational and the two suitors, Midea e Samsung. More Midea than Samsung as some experts believe, despite tough American opposition. Samsung would have been brought in - again according to the rumors - by those who have and had an interest in raising the price, in un-ripping the Chinese of the very rich Midea from an underlying greed that had already slowed down previously, in 2016, together with the political conditioning, other operations. And that had forced them into a long negotiation with the Germans of the robotics giant KUKA AG: to acquire it Midea had had to accept a price increase of about 36%. And then – as revealed previously - Investor AB, the main shareholder of the Swedish company, asked Midea for “help” to overcome the very tough opposition of the American government with a suitable increase in the purchase price. We recall that Midea's offer of 3,6 billion euros was made two months ago, good compared to a stock market value of 2,7 billion but much lower than the 4 billion of the current capitalization. To understand the gigantic scenario in which M&A operations take place, resumed after Covid, it is advisable to get to know Midea and Samsung better.
7 mega acquisitions in a few years
Long negotiations also for other heavy operations such as the acquisition of the household appliances business of the Japanese giant Toshiba which opened up the Japanese and Italian markets Clivet SpA, a strong Italian manufacturer of air conditioners. In 2016 Electrolux, which already had an industrial and commercial joint venture with Midea, sold her the home cleaning jewel with over 100 years of activity, the American Eureka. Sale judged imprudent because - as stated by Electrolux US itself - the revenues from Eureka had been equal to about 60 million dollars in the last 12 months. The most recent deals – just to name the big deals – include the 13 billion yuan ($2 billion) purchase of the big Chinese appliance maker, Wuxi Little Swan Co, in 2019. In December 2020, Midea entered the elevator industry with the purchase of Winone Elevator Co. In early 2021 he agreed on a 29% stake in Beijing Wandong Medical Technology Co. All or almost cash.
Because Biden is worried and the EU is too
It's simple. An open passage, as pointed out by some press agencies linked to circles in the Pentagon, with household appliances and other types becomes a highway for the conquest of strategic markets. Any international acquisition promises to increase China's access to research and development in the countries it enters, influence in global markets and supply chain leverage. And indeed Midea always keeps a track record of international investment intended to support - the alarmed comment the agencies - both the civil and military infrastructure of China. Since its acquisition in 2016, Kuka has in fact been integrated into this Beijing infrastructure, and now counts major Chinese and international electric vehicle manufacturers, including BYD e Tesla, as its customers, increasing Beijing's footprint in this strategic growth sector. The Midea sector of car components, Welling Auto Parts, has become a vital knot in China's electric vehicle supply chain, having developed critical components such as drive motors and electric compressors to eliminate import dependencies. A member of the Chinese Communist Party commented that in this way the country "is putting an end to the historic suffocation of the Chinese automobile industry". That this worries Americans is understandable, as it is that a nation as large and powerful as China tends to keep growing.
Self-finance almost all acquisitions
Midea has rarely resorted to the capital market to make acquisitions, because it has had huge resources for many years. For example, it had about $2022 billion in cash in 8, double the entire market capitalization of Electrolux. But whatever the outcome of this round of M&A of the majaps made in Europe may be, the time factor will impose rhythms and even modalities. And in any case, nothing moves in Rome and no one has real and effective contact with the heads of the multinationals who operate undisturbed on the European white chessboard. The Government he simply stated that he wanted to exercise i special powers in terms of strategic assets in relation to the operation Whirlpool EMEA e Arcelik to verify how to maintain employment and relaunch the R&D, production and supply chain sites connected to the Italian factories of Whirlpool, and perhaps also of Electrolux. A vagueness of an operational and above all programmatic nature that rightly worries employees, parties and local authorities. Which reveals, in reality, a disarming underestimation - our sources underline - and a lack of knowledge of the scenario.
Long times
What will happen next to the factories (9 by Whirpool and 2 by Arçelik) and employees (in total over 20 thousand) of Whirlpool along with, possibly, those of Electrolux? What will happen in particular in the face of the demand crisis which, after the brief recovery in April, has stalled again? And that it is global, given that for the first time, sales have also dropped in China (by 3,5%)? In short, nothing. Apart from the formal conclusion of the offer to Electrolux by Midea or Samsung. Lots of layoffs, prolonged stoppages of production activities and growing social tension. Because the same sale by Whirlpool of 75% of its EMEA subsidiary to the Turkish Arçelik, after it had already sold its production activities in Turkey and all of Whirlpool Russia, although approved by the Italian government, is nonetheless subject to approval of the European Commission which must verify, as required by the common antitrust legislation, that the new company, Beko Europe, does not have – as it appears from an initial examination of the market data – a dominant position in control of the household appliances market.
To establish it officially, however, the Commission is consulting the Antitrust authorities of the 27 member countries: the experts of these institutions in each country will subsequently have to examine and define the shares of the new company in each of the various household appliances families. Then transmit them to Brussels which will then have to process a complex amount of data in order to give a final European panorama on how and why Beko Europe would or would not have a position such as to compromise free competition. And this concerns not only the total shares but also the different market shares of each product family. Which would mean that the European antitrust commission, at the end of this long procedure could, for example, authorize the start-up of the new company in its entirety, without conditions or request a spin-off of one or more families for which Beko Europe would have a share control not compatible with the respect of the conditions of free trade. It will be very difficult for a decision to be made before September. “And from September in all probability the official pronouncement – comments a member of the European bureaucracy in Brussels – will be postponed to December”.
Midea is strong and rich
Chinese multinationals have become very rich, powerful and autonomous from Western financial markets because, as is known, more than 30 years of foolish relocations by Western companies has allowed it. They have transferred him not only immense financial resources but also enormous skills, patents and technologies… Aware of the opposition of the American government for some years now, Midea has adopted a strategy: to promise considerable investments. And to ensure that she is "Americanized". It has plans for a new facility in North America as early as 2021 and expects to increase its head office staff by 20% from its current 173. Ed has hired as president di Midea America, instead of the usual Chinese bureaucrat, an American super manager, with a long experience in the household appliances sector, Kurt Jovais. Thus sales on the North American market have risen from 100 million in 2015 to over 1 billion dollars in 2022, so much so that this has made Jovais say that "the United States is Midea's main growth engine and has become the second market in the company after China”.
But even Samsung is not joking
La capitalization of market of Samsung as of October 2022 is $262,80 billion, Samsung is considered the XNUMXth most valuable company in the world by market capitalization. However, a premise is obligatory: when dealing with an Asian company, the transparency of information is optional, and the Korean chaebol are – like more than the Chinese giants – unwilling to answer journalists' questions (source: Samsung Rising by Geoffrey Cain ). The same Asian press is full of enthusiastic information on Samsung and LG products, but economic analyzes are very rare. In case Samsung becomes the new owner of Electrolux, it is good to know that the Korean chaebol culture is all about one principle: never trust and control practically everything from headquarters. Journalists and especially non-Korean managers of branches around the world know something about it.
First in TV and TLC but down in chips
From the necessary disclosures to investors that Samsung Electronics is forced to give in any case, it emerges that even in 2023 it is still in first place in the global television market and it is for 17 consecutive years, a rich sector because together with Korean rival LG dominates the ranges of smart TVs and more expensive models in general (the only ones on the increase), while behind them the platoon of big Chinese advances, which for now controls the ranges of entry level and medium-priced TVs. At the moment. However, the first quarter of 2023 ended very badly as profit collapsed by 96% to its lowest level since 2009 due to the fall in demand for chips which caused prices to plummet. Q63,75 revenue (47,6 trillion Korean won, (about $18 billion) was down 2022% year over year. And that's after the last quarter XNUMX was also disastrous. The most Samsung's biggest profit engine has always been its own semiconductor division which consists of selling memory chips ranging in everything from personal computers to smartphones to servers in data centers.
Surprise, they are not commodities
And not even the important ones sales of the new series of Galaxy S23 smartphone managed to compensate for the global collapse. Good news on the other hand from the smart and high-end household appliances sector where Samsung maintains sales records in almost all continents thanks also to the fact that they can now all be controlled with SmartThings (entirely compatible with Matter), the advanced automation software to which it has The giant ABB also joined with which in 2022 Samsung closed an agreement to jointly develop the sector and equip homes and buildings with connections and controls suitable for saving energy and creating comfort and entertainment. Contrary to what many financial analysts mistakenly believe, who consider household appliances to be trivial commodities, the digitization of buildings will largely pass through smart appliances and this is probably the key to understanding the dynamism that has suddenly shaken the global majaps sector. Not by chance Samsung in 2014 has absorbed SmartThings Inc., an American company, specialized in automation software, cloud platforms and IoT which today boasts over 60 million active users, but in constant double-digit growth.
