They were already in the process of shutting down a compressor manufacturing facility in Italy and now, Whirlpool Corporation says they will get out of the compressor business completely by selling their Embraco unit business to a Japanese corporation.
The Benton Harbor-based appliance giant announced this morning that they have entered into an agreement to sell the Embraco compressor business to Nidec Corporation for a cash purchase price of $1.08 billion, subject to customary working capital and indebtedness adjustments. The transaction is expected to close in early 2019, subject to regulatory approvals and other customary closing conditions.
Whirlpool CEO Marc Bitzer says, “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.” He adds, “The planned tender offer further demonstrates our commitment to returning capital to shareholders, consistent with our balanced capital allocation strategy.”
Headquartered in Brazil, Embraco has been a Whirlpool majority-owned business unit since 1997. The business has a workforce of approximately 11,000 employees across eight global manufacturing facilities located in Brazil, Italy, China, Slovakia and Mexico. Embraco also maintains commercial offices in the United States and Russia.
The Embraco business is currently reported as part of Whirlpool Corporation’sLatin America segment. In fiscal year 2017, Embraco contributed approximately $1.3 billion to Whirlpool’s net sales with margins approximating the segment average.
The transaction is not expected to have a material impact on Whirlpool Corporation’s 2018 financial results.
As previously announced, Whirlpool expects to cease operations and end production at Embraco’s Italy facility, which is subject to a separate agreement with local authorities and unions. Therefore, the Embraco Italy facility is not included in the sale to Nidec Corporation.
Joao Carlos Brega is President of Whirlpool Latin America. He says, “Nidec has been a trusted supplier for decades, and we look forward to building on that relationship in the future.” Brega adds, “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.”
Citigroup Global Markets Inc. acted as exclusive financial advisor, and Linklaters LLP and Cleary, Gottlieb, Steen and Hamilton LLP acted as legal advisors for Whirlpool.
Meanwhile, Whirlpool also revealed intent to launch a “modified Dutch Auction” tender offer for up to $1 billion of its common stock at an anticipated price per share not less than $150 and not greater than $170, subject to market conditions. The tender offer is expected to launch this Thursday, April 26, 2018.
The company has arranged committed financing in an amount approximating the net proceeds from the Embraco transaction and, consistent with their balanced approach to capital allocation, intends to use the proceeds of the financing to fund the tender offer under their existing share repurchase authorization. Whirlpool expects to repay the financing amount with the proceeds from the sale upon closing of the Embraco transaction.
Subsequent to the completion of the tender offer, the company intends to “opportunistically execute open market share repurchases throughout 2018.” Share repurchases had previously been suspended since the end of 2017 pending the completion of the Embraco sale process and related negotiations.
Embraco is a global company that promotes quality of life through innovative cooling solutions. With eight plants and two commercial offices, the company has approximately 1,700 patents granted and is present in over 80 countries showcasing technologies that advance high performance and energy efficiency. Embraco provides cooling solutions for household, commercial, medical, retail applications, and aftermarket segments. Through partnerships with startups and digital services, it also delivers value and intelligence to its customers.
Nidec was founded in Kyoto, Japan 45 years ago by four engineers and has since grown into a leading comprehensive motor manufacturer encompassing approximately 300 subsidiaries employing over 100,000 people throughout the world. After becoming the first company in the world to successfully commercialize a direct drive spindle motor for HDDs using brushless DC motor technology, the company branched off into the appliance component market which now constitutes one of its fastest growing business segments. In 2017, Nidec’s Global Appliance Division also acquired the Secop Group, a leading European manufacturer of refrigeration compressors.
