(Bloomberg) -- Whirlpool Corp. agreed to buy Insinkerator, Emerson Electric Co.’s garbage-disposal business, in a $3 billion transaction.
The all-cash deal is expected to close in the fourth quarter of this year, subject to regulatory approvals, the company said in a statement Monday. It’s expected to add about $1.25 to Whirlpool’s earnings per share in its 2023 fiscal year.
The transaction comes as Whirlpool conducts a review of its business to concentrate on areas with high growth and margin potential by focusing on the Americas, on countertop appliances and on the commercial segment. The company announced the sale of its Russian operations in late June.
Whirlpool should benefit from people replacing their Insinkerator units, helping the company maintain sales as the US housing market softens in the near term, Bloomberg Intelligence analyst Drew Reading wrote.
The company said in July that demand for appliances has dipped amid decades-high inflation and fewer home purchases and will likely remain suppressed through 2022.
Whirlpool shares fell 0.1% at 9:53 a.m. in New York, while Emerson’s stock rose 0.1%.
Mike Dahl, an analyst at RBC Capital Markets, said the deal makes sense though the purchase price looks “elevated” given the slowdown in the US housing market and other factors.
Whirlpool plans to initially pay for the acquisition with available funds on hand and will issue debt later on, according to the statement. The company said on a conference call with investors that it will also suspend buybacks for the remainder of 2022.
Insinkerator has a commanding lead in the food waste-disposal industry, with a greater than 70% market share. Bloomberg News reported in May that Emerson was looking for a buyer for the unit. Under Whirlpool, the brand will operate as a separate business within the North America region, which accounts for more than half of the appliance maker’s sales.
Whirlpool, based in Benton Harbor, Michigan, sees an opportunity to sell Insinkerator products under its brands, including KitchenAid and Maytag, Chief Financial Officer Jim Peters said in an interview. The focus will be on the US and Canada, but the company could also introduce the lineup to other markets.
Insinkerator is expected to have about $650 million in sales and earnings before interest, taxes, depreciation and amortization of more than $170 million for the year ended Sept. 30, according to the statement. It will keep its headquarters in Wisconsin.
Whirlpool doesn’t anticipate a major restructuring of Insinkerator’s workforce or manufacturing footprint, Peters said. The company should be able to pay down a significant portion of the acquisition cost soon, which would allow it to look at other deals in the next couple of years, but there are no immediate plans.
Emerson has been an active dealmaker. In May, it closed a merger with Aspen Technology Inc. of its industrial software arm. Emerson also announced the sale in March of its Therm-O-Disc Unit to private equity firm One Rock Capital Partners.
(Updates with analyst in seventh paragraph, deal funding in eighth)
©2022 Bloomberg L.P.