GE to buy Honeywell for $45B, Welch to stay on:Mkt will rock Monday
Posted at 5:59 p.m. PDT Sunday, October 22, 2000
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GE to buy Honeywell, Welch to stay on
BY PATRICIA VOWINKEL
NEW YORK (Reuters) - General Electric Co. said on Sunday it agreed to buy Honeywell International Inc. for $45 billion in stock, in a move to bolster its key aerospace, industrial systems, power and plastics businesses.
As part of the deal, the largest acquisition in GE's history, John ``Jack'' Welch will stay on as chairman and chief executive of GE through the end of 2001, pushing back a planned April retirement in order to see the through the integration of Morris Township, N.J.-based Honeywell.
GE was expected to name a No. 2 and heir apparent to Welch, an American business icon who turns 65 in Nov. 19, within the next month or two. A senior member of GE's board, Silas Cathcart, did say in a release, however, that the company planned ``to proceed on schedule with succession actions to name a chairman-elect before year end.''
Michael Bonsignore, chairman and CEO of Honeywell, will become a GE board member, and two more Honeywell directors will join the GE board.
``Honeywell's core group of businesses -- Avionics, Automated Controls, Performance Materials and its new microturbine technology -- are a perfect complement to four of GE's major businesses,'' Welch said in a statement.
Fairfield, Conn.-based GE made an 11th-hour bid for Honeywell on Friday, just one day after Honeywell confirmed it was in merger talks with Hartford, Conn.-based United Technologies Corp.
United Technologies had offered about $40 billion in stock, or about $50 a share before breaking off the talks on Friday after GE expressed interest in Honeywell.
Honeywell, formed in December through the merger of Allied Signal and the old Honeywell, is a leading maker of avionics, or aircraft electronics, as well as turbochargers, specialty chemicals and automated control systems.
GE, meanwhile, is a leading manufacturer of aircraft engines. Among its many interests, GE also owns financial services powerhouse GE Capital and the NBC television network.
The deal will add at least 10 cents to GE's earnings per share in its first full year, GE said.
``It makes perfect sense,'' said Nicole Parent, a vice president and analyst at Banc of America Securities.
The combined company, she said, would have an ``amazing fit in aerospace, industrial automated power systems and plastics.''
The corporate cultures also would mesh well, she said, noting that Lawrence Bossidy, a former top executive at GE, had been chairman and chief executive of Allied Signal and then was chairman at Honeywell after those companies merged.
``Culturally, GE and Honeywell would have a fantastic fit,'' Parent said.
Allied Signal agreed to acquire the old Honeywell in June 1999. The company retained the name Honeywell. Bossidy retired as chairman in April.
Parent said she expects few antitrust problems, noting that the companies have very little direct overlap.
Under the deal, GE will pay 1.055 of its shares for each share of Honeywell. That values Honeywell at about $55.12 a share, based on GE's closing price on Friday of $52-1/4.
Shares of Honeywell rose $10-5/16, or nearly 29 percent, to close at $46 in regular trading on the New York Stock Exchange on Friday.
GE stock, in contrast, fell $3-3/8, or more than 6 percent, to close at $52-1/4 in regular NYSE trading on Friday.
Welch -- renowned for his business acumen in running the conglomerate that is America's most valuable company in terms of market capitalization -- pounced on the chance to buy Honeywell.
Welch, who only learned late Thursday that Honeywell was in merger talks with United Technologies, apparently called Honeywell's board on Friday morning, to discuss a bid just as the board was considering the United Technologies offer.
CNBC, a unit of General Electric, first reported the talks between United Technologies and Honeywell late Thursday afternoon and then broke the news to Welch, who was on the floor of the New York Stock Exchange at the close of trading.
When told of the talks between United Technologies and Honeywell, Welch expressed surprise and told CNBC he would have to think it over.
Although the timing of the bid, just months ahead of Welch's planned retirement, came as a surprise, Banc of America Securities analyst Parent said she was not surprised by how quickly GE moved.
``In terms of the materialization of the offer, it doesn't surprise me,'' she said. GE has shown, she pointed out, it is ''able to identify and pounce on opportunities quickly.''
Among other deal protections, GE said it will receive an option to buy 19.9 percent of Honeywell's outstanding shares.
The merger, expected to close in early 2001, will be accounted for as a pooling of interests. |
