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.
NO RECIPROCITY: Taipei has called for cross-strait group travel to resume fully, but Beijing is only allowing people from its Fujian Province to travel to Matsu, the MAC said The Mainland Affairs Council (MAC) yesterday criticized an announcement by the Chinese Ministry of Culture and Tourism that it would lift a travel ban to Taiwan only for residents of China’s Fujian Province, saying that the policy does not meet the principles of reciprocity and openness. Chinese Deputy Minister of Culture and Tourism Rao Quan (饒權) yesterday morning told a delegation of Chinese Nationalist Party (KMT) lawmakers in a meeting in Beijing that the ministry would first allow Fujian residents to visit Lienchiang County (Matsu), adding that they would be able to travel to Taiwan proper directly once express ferry
FAST RELEASE: The council lauded the developer for completing model testing in only four days and releasing a commercial version for use by academia and industry The National Science and Technology Council (NSTC) yesterday released the latest artificial intelligence (AI) language model in traditional Chinese embedded with Taiwanese cultural values. The council launched the Trustworthy AI Dialogue Engine (TAIDE) program in April last year to develop and train traditional Chinese-language models based on LLaMA, the open-source AI language model released by Meta. The program aims to tackle the information bias that is often present in international large-scale language models and take Taiwanese culture and values into consideration, it said. Llama 3-TAIDE-LX-8B-Chat-Alpha1, released yesterday, is the latest large language model in traditional Chinese. It was trained based on Meta’s Llama-3-8B
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has