General Electric Co, the world's biggest jet-engine maker, agreed to buy Smiths Group Plc's aerospace business for US$4.8 billion amid record demand for commercial aircraft.
The purchase will broaden GE's offerings for aviation customers, including flight management systems, power management and airborne computing systems, Fairfield, Connecticut-based GE said yesterday in a statement. Smiths plans to return 2.1 billion pounds (US$4.12 billion) to shareholders, the company said.
Chief Executive Officer Jeffrey Immelt wants to tap surging orders for Boeing Co and Airbus SAS aircraft parts amid rising travel overseas and plans by the US military to develop new planes. The purchase would give GE some of the breadth it failed to get when the European Union rejected its US$45 billion bid for Honeywell International Inc in 2001, Bloomberg News said.
"Smiths might make some real sense for GE," Teal Group analyst Phil Finnegan said before the announcement. The Smiths business competes in some areas with Honeywell, Goodrich Corp, United Technologies Corp's Hamilton Sundstrand unit and Rockwell Collins Inc.
"We focus investments where we can take leading positions in growth markets," Immelt said. He said the acquisition is "largely complementary technology, we view this as additive, not consolidating," when asked whether jobs might be cut. GE currently has 16,000 employees in the UK, he said.
Immelt also said he didn't expect to run into difficulties with EU regulators because Smiths aerospace business is "much smaller" than Honeywell, measured by sales.
Smiths in the past two years faced pressure from investors after the company's results missed some forecasts, Credit Suisse analysts including Steve East said in November. Smiths had a second-half loss of 109.3 million pounds after writing off an investment in car-parts maker TI Automotive Ltd.
Smiths will also form a joint venture with GE to combine the pair's detection and homeland-protection assets, the UK company said separately. Smiths GE Protection will be 64 percent-owned by Smiths and chaired by its Chief Executive Officer, Keith Butler-Wheelhouse. GE had been interested in buying the business outright, Immelt said, but had to do a joint venture as Smiths wasn't willing to sell it.
GE plans to buy about US$7 billion in non-financial assets this year, Immelt said at a December meeting with analysts. He has spent almost US$70 billion on acquisitions since taking the helm in 2001, and people familiar with the talks said last week that he is seeking as much as US$10 billion in an auction of GE's plastics unit.
(Shanghai Daily January 17, 2007)