General Electric Co, the world's biggest jet-engine maker, has agreed to buy Smiths Group Plc's aero-space business for US$4.8 billion amid record demand for commercial aircraft.
The purchase of the Smiths unit, which makes electronic controls, is subject to approval by Smiths shareholders and regulators, Fairfield, Connecticut-based GE said yesterday in a statement. Smiths plans to return ?2.1 billion (US$4.12 billion) to shareholders, the company said in a separate statement.
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 EU rejected its US$45 billion bid for Honeywell International Inc in 2001.
"Smiths might make some real sense for GE," Teal Group ana-lyst 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.
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 after writing off an investment in auto parts maker TI Automotive Ltd.
GE shares fell US$0.03 to US$37.89 on Friday on the New York Stock Exchange trading. They gained 6.2 percent last year. US markets were closed yesterday for the Martin Luther King Jr holiday. Smiths rose ?0.01 to ?9.85 in London on Friday.
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 CEO Keith Butler-Wheelhouse.
GE plans to buy about US$7 billion in non-financial assets this year, Immelt said at a meeting last month with analysts.
Immelt 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.
Analysts including Merrill Lynch & Co's John Inch and Credit Suisse's Nicole Parent said he may funnel some of the proceeds into more acquisitions.
Last week she identified aero-space as one possible market, and analysts said Immelt's US$7 billion goal excludes any purchases made with the plastics sale proceeds.
Chicago-based Boeing this month said orders reached a record last year, the second straight record-setting year at the world's second-largest maker of commercial planes.
The industry is benefiting from demand in Asia and the Middle East, where the number of first-time air travelers is growing along with regional economies and airline deregulation. The Smiths aerospace business won't peak until 2009 "at the earliest," Credit Suisse said.
Smiths also has no overlap with GE's products. The company is developing computer systems and equipment for Airbus' A380 superjumbo jet and Boeing's fuel-efficient 787 model and its 767 military refueling tanker. Smiths also makes military airframes and compon-ents, including some for Lockheed Martin Corp's F-35 plane, formerly known as the Joint Strike Fighter.
The unit also makes propellers, refueling equipment, landing gear and electromechanical systems and structures.
GE, also the world's biggest aircraft lessor, may have an easier time going before the European Commission this time than it did with Honeywell. That's because the Court of First Instance -- the avenue for appeal -- said in 2005 that the EU was in error in using an argument for "conglomerate" effects used by then commissioner Mario Monti, opening the way for aerospace acquisitions by GE. The appeals court upheld the rejection of the Honeywell deal.
HONG KONG SECURITY: The president blasted regulations requiring Taiwanese agents or political organizations to provide information on their Hong Kong-related activities President Tsai Ing-wen (蔡英文) yesterday warned of countermeasures should controversial Chinese national security legislation imposed on Hong Kong undermine or harm Taiwanese interests. Article 43 of the legislation empowers the Hong Kong Special Administrative Region to serve written notices to Taiwanese political organizations or individual agents to furnish information on their Hong Kong-related activities, including their personal particulars, finances, assets, expenditure and capital in the territory. Failure to comply or providing false or incomplete information can result in a fine of HK$100,000 (US$12,903) or imprisonment of six months or two years respectively. Tsai said that Taiwan would keep a close watch on how
PROBE LAUNCHED: An officer who served as a supervisor in the drill died in an apparent suicide after the accident, which was caused by unexpected waves Two marines who were on Friday injured in a military exercise in the waters off Kaohsiung passed away yesterday, Navy Command said. The marines — surnamed Tsai (蔡), 26, and a sergeant surnamed Chen (陳), 36 — were in a seven-member Marine Corps team that encountered rough seas during a simulated response to enemy forces landing on Taiwan. Their rubber craft overturned in waters off Taoziyuan (桃子園) beach in Zuoying District (左營), injuring four of the marines. They were rushed to hospital, where three of them — Tsai, Chen and a 34-year-old sergeant — were taken to an intensive care unit
MORAL COURAGE: The Ministry of Foreign Affairs urged the global community to face China’s intention to subdue Taiwan and reject such irrational requests The Ministry of Foreign Affairs yesterday strongly condemned the Chinese government for meddling with US officials’ interactions with Taiwan after FBI Director Christopher Wray revealed China’s efforts to discourage US officials from visiting Taiwan. The greatest long-term threat to the US’ information security and intellectual property, as well as its economic vitality, is China’s counterintelligence and economic espionage operations, Wray told a video event at the Hudson Institute in Washington. Beijing is engaged in a highly sophisticated and maligning foreign influence campaign, with methods that include bribery, blackmail and covert deals, he said. Giving an example, Wray said that when a US official
‘SIGNAL TO ALLIES’: The US Navy’s exercises are not in response to those carried out by China, the commander of the strike group led by the USS ‘Ronald Reagan’ said Two US aircraft carriers were yesterday conducting exercises in the disputed South China Sea, the US Navy said as China also carried out military drills that have been criticized by the US Department of Defense and neighboring states. China and the US have accused each other of stoking tension in the waterway at a time of strained relations over everything from COVID-19 to trade to Hong Kong. The USS Nimitz and USS Ronald Reagan were carrying out operations and exercises in the South China Sea “to support a free and open Indo-Pacific,” the navy said in a statement. It did not say exactly