12 November, 2009
UPDATE 4-GE sells security arm to United Tech for $1.82 bln
* Sale to help streamline GE portfolio
* United Tech says deal to add to earnings after 2010
* GE, United Tech shares little changed
(Adds United Tech executive comment, paragraph 11-12)
By Scott Malone
BOSTON, Nov 12 (Reuters) - General Electric Co (GE.N) will
sell its security business to United Technologies Corp (UTX.N)
for $1.82 billion, a deal that marks a step in the largest U.S.
conglomerate's portfolio streamlining.
GE, which stumbled financially last year in the face of a
severe economic downturn, is in the process of pruning its
diverse stable of businesses, including trimming its GE Capital
finance arm and considering the possibility of taking on
another partner for its NBC Universal media arm.
For United Tech, the world's largest maker of elevators and
air conditioners, the deal greatly boosts its presence in the
U.S. security market -- selling products like security cameras
and fire-detection systems for homes and offices.
The purchase will be neutral to diversified U.S.
manufacturer United Tech's 2010 earnings, after restructuring
and transaction costs and will add to earnings in 2011 and
beyond helped by cost cuts, United Technologies' Chief
Executive Louis Chenevert said in a statement on Thursday
announcing the transaction.
The security business is on track to generate about $200
million in earnings before taxes, interest, depreciation and
amortization on $1.2 billion in revenue this year, United Tech
disclosed in slides on its Web site.
GE Security, part of GE Technology Infrastructure, has
about 4,700 employees in 26 countries.
Fairfield, Connecticut-based GE could sell off businesses
generating $25 billion to $30 billion in revenue -- about
one-fifth of its operations -- over the next two to three
years, Bernstein Research analyst Steven Winoker wrote in a
recent note to clients.
"While the sale reinforces that some of the company's
longer-term growth investments have not worked out as
anticipated, we think that point is moot for now, overshadowed
by the cash that comes in the door, which the company can
contribute to GE Capital," J.P. Morgan analyst Stephen Tusa
wrote in a note to clients.
'GOOD FIT' FOR UNITED TECH
Analysts said the move looked to be a good one for
Hartford, Connecticut-based United Tech, which has been
building its presence in the security sector over the past
decade through a series of acquisitions.
"We see the business as a good strategic fit for UTC Fire
and Security; the company had very little exposure to the North
American Fire & Security market," Deutsche Bank analyst Nigel
Coe wrote in a note to clients.
Ari Bousbib, who serves as president of United Tech's
commercial companies -- Carrier air conditioners, Otis
elevators and the fire and security arm -- said United Tech
aimed to expand the business model of the security businesses
it was buying from GE to include a stronger service element,
not just product sales.
It also plans to close about 40 percent of its branches, so
that each location will provide fire, security and
fire-extinguisher services, rather than having separate
locations for each business.
United Tech executives have repeatedly told investors this
year that they aimed to take advantage of the worst recession
the United States has experienced since the Great Depression of
the 1930s to find takeover targets at attractive prices.
GE shares were down 5 cents at $15.78, while United Tech's
were up 28 cents at $67.25 on the New York Stock Exchange.
This marks the first time United Tech has bought a unit
from GE since 2001, when GE tried to box out United Tech in a
bid for Honeywell International Inc (HON.N), a United Tech
spokesman said. GE successfully outbid its Connecticut rival
but the deal was ultimately quashed by regulators.
United Tech's rivals in the security industry include Tyco
International Ltd (TYC.N), Stanley Works (SWK.N) and Japan's
Secom Co Ltd (9735.T).
(Reporting by Scott Malone in Boston and Christopher Kaufman
in New York; Editing by Derek Caney, Dave Zimmerman and Matthew
Lewis)
Source: http://www.reuters.com
UPDATE 4-GE sells security arm to United Tech for $1.82 bln Added: (12.11.2009)
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