General Electric has agreed to acquire Honeywell International for $45 billion in stock as GE chairman John F. Welch Jr. postponed his planned retirement until the end of 2001 to oversee the merger.
The boards of GE and Honeywell approved the deal Sunday to create one of the world’s largest industrial companies following some intense last-minute dealmaking by GE, which scuttled the plans of industrial conglomerate United Technologies to buy Honeywell for about $40 billion. United Technologies called off its negotiations on Friday after Honeywell revealed it was talking to a new suitor.
GE will pay 1.055 of its shares — or $54.99 — for each of Honeywell’s 801 million outstanding shares. Based on Friday’s close. GE’s valuation of Honeywell represents a nearly 10 percent premium over United Technologies’ bid.
Wall Street was uninspired by news of the deal. GE lost $3.31 today to close at $49.19, while Honeywell rose $2.88 to $49.88. But the news had little, if any, impact on other stocks.
Bringing the Companies Together Under terms of the deal, expected to close in early 2001, GE will also assume an unspecified amount of Honeywell debt. Honeywell’s corporate headquarters in Morristown, N.J., will be closed as part of the deal and about 550 employees there may lose their jobs, said Honeywell spokesman Tom Crane.
But the top executives of both companies focused on the deal’s upside today, emphasizing areas where GE and Honeywell have overlapping businesses but with few, if any, overlap in products.
“GE brings good things to life and we’re confident we bring good things to GE,” Honeywell CEO Michael R. Bonsignore said during a news conference in New York.
Welch said Honeywell was too good to pass up, and derided suggestions that GE should’ve been shopping for a New Economy company rather than a venerable manufacturer.
“This is a high-tech company. GE is a high-tech company. We’re merging two real high-tech companies, with real earnings that do real things,” Welch said.
“This transaction preserves and strengthens the Honeywell brand worldwide while providing superior value to our shareowners, customers and employees,” said Bonsignore, who will join GE’s board of directors. “Honeywell’s rich global heritage of technology and innovation will be substantially enhanced as part of GE.”
GE Plans to Become More Profitable GE expects the acquisition of Honeywell to boost its earnings per share by double digits in the first full year, excluding any one-time charges.
GE is a diversified company that produces power plant parts, aircraft engines, appliances and owns the NBC television network. Honeywell manufactures equipment for aerospace systems, power generation, transportation and factory automation, as well as specialty chemicals, plastics, fibers and other industrial materials.
“This is how GE gets a bigger footprint in the global marketplace, increasing its size by nearly a third overnight and adding to its dominance in key areas,” analyst Nicholas P. Heymann of Prudential Securities said Sunday.
Another Side to a Diverse Company GE, the world’s most profitable company with anticipated 2000 revenues of $130 billion, has been remaking itself since the 1990s into a powerhouse in financial services, business consulting and equipment maintenance, with 70 percent of sales coming from these revenue streams, according to Heymann.