It's not a raffle, but almost. Royal Phillips, the consumer electronics multinational, a year ago had put the small appliances sector is for sale, including branded espresso machines Saeco e Gaggia, to focus on the development of healthcare equipment, where it competes with Siemens with high profits and, given the global health emergencies, with important prospects. To buy the division of small appliances from Philips (a sector with very strong growth all over the world) they would probably be needed over 3 billion, given that the sector was worth between 2020 and 2,3 billion in 3. Philips would intend to close the deal by mid-2021: among the companies that have come forward there are – second China Daily, Press, Reuters e Bloomberg - the Chinese giants (Haier, Midea, Joyoung and Gree Electric), Korean ones (Samsung and LG Electronics) and the Turkish ones (Vestel and Arcelik).
It should be noted that the relationship between Philips and LG date back to 2000, when the Dutch company came to the rescue of the financial difficulties of the chaebol Korean (synonym for large industrial conglomerate, in the local language) with an industrial joint venture for the supply of LCD screens in exchange for the purchase by Philips of 15% of the capital of the Asian company. According to Korean sources, LG is strongly interested the purchase of the small appliances branch of Philips, because it wants to move more and more with demanding investments in the luxury area with kitchens, mega-fridges and Premium range wine cellars (see the Signature brand).
But what makes the deal interesting is the fact that the small appliances branch, according to GFK, recorded double and three-digit growth worldwide in 2020, with a minimum of 15 and a maximum of 110, 120%. Also, in 2021 the sector is growing at a very strong pace, especially with regard to food processing robots (especially pasta, bread and desserts) and espresso coffee machines (the real one). Thus, worldwide banks, funds and buyout companies are moving around this gigantic deal: JPMorgan e Goldman Sachs, but also Blackstone Group Inc., CVC Capital Partners and KKR & Co. After all, when the Dutch group sold the Lumileds lighting components division five years ago, the business attracted the interest of several companies, including Apollo Global Management LLC, Bain Capital, CVC, KKR and Onex Corp.
But there is another reason why Philips is in a hurry to close the operation, and that is that in the second quarter of 2020 the household appliances business had experienced a double-digit drop in sales due to Covid-19. The company also estimated that the total business separation costs would be between 120 and 140 million euros. The Dutch giant has its R&D centers in India, Hong Kong, Singapore and Italy with around 4.700 employees. Besides that, there are factories in Austria, Brazil and China. Philips sells 47% of its home appliances in Europe, 15% in Asia Pacific, 14% in China and 7% in India.
At the moment, the sectors favored by the pandemic are particularly attractive. In fact, Covid 19 has led to a worldwide homogenization of household behavior, which for the first time rewards high-quality small appliances, according to the very latest research carried out worldwide by GFK. The global market for espresso machines, where Gaggia and Saeco are present, is in fact profitable and rising (especially if you operate with an Italian or Italian sounding brand) with a value of over 6 billion dollars in 2020 and with constant growth forecast between now and 2025 around 3,7-5%. The number one selling espresso machine has been for years De'Longhi, with a share of over 34%. The company acquired the American Capital Brands Holdings Inc from the investment fund Center Lane Partners, which develops and sells household appliances in over one hundred markets worldwide under the Nutribullet and Magic Bullet brands.
Il Breville group instead, it acquired Seattle-based coffee-grinding company Baratza for $60 million with $43 million paid in cash and the other $17 million issued through stock. Baratza designs and markets premium coffee grinders for the North American and international markets.
