Electrolux set for AEG offer: Swedish group squares up to acquire household appliance arm

ELECTROLUX, the Swedish domestic appliance maker, has increased its stake in AEG Hausgerate, AEG's household appliances division, to 20 per cent as a prelude to acquiring the remaining shares at a total cost of up to DM1bn ( pounds 390m).

Negotiations between Electrolux and AEG, owned by Daimler-Benz, are expected to last two more months.

The acquisition will provide Electrolux, the biggest European white goods producer, with a strong brand in an important market. In 1992 the AEG division had sales of DM2.7bn.

Electrolux's share of the German white goods market will rise from 20 per cent to an estimated 35 per cent, and its share of the total European market to about 30 per cent.

Its move is strategically important in the increasingly concentrated white goods industry. Whirlpool, the US-owned manufacturer, has mounted a particularly vigorous challenge to European market leaders in the past three years.

Electrolux is unwilling to comment on how it will fund the deal. Although it has said it is not planning to raise new capital, net debt stands at 164 per cent of equity. Analysts believe Electrolux will have to sell some peripheral businesses to help fund the new acquisition.

According to one industry analyst: 'There is potential for rationalisation. They will have to get production costs down as fast as possible and move away from expensive German locations.'

Lennart Ribohn, senior executive vice-president of Electrolux, said it was hard to be precise about job losses, but added: 'We have definitely said that we will not close any of the (AEG) facilities.'

The sale of AEG's domestic appliances division, which has been co-operating with Electrolux on product development and production since 1992, is part of the radical restructuring of the German group around core transportation activities.