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GE Selling Off the E? Electrical Divisions Allegedly on the Market

GE's new CEO is reportedly selling off the underperforming industrial solutions division to ABB, and the light bulb manufacturing unit could be next.

Authors: Aaron Kirchfeld, Ed Hammond and Richard Clough

General Electric Co. is nearing an agreement to sell its industrial-solutions business to ABB Ltd. in a deal valued at $2.5 billion to $3 billion, people with knowledge of the matter said.

The companies are likely to announce an accord by next week, said the people, who asked not to be identified because the talks are private. The decision caps a months-long bidding process after GE put the electrical-products unit up for sale in December.

The transaction is poised to be the first major portfolio change under GE's new chief executive officer, John Flannery, who is trying to reverse this year's biggest  stock slide on the Dow Jones Industrial Average. Under pressure from activist investor Trian Fund Management, GE agreed in March to deepen its cost-cut targets. Proceeds from the industrial-solutions sale would be used to fund restructuring, the company has said.

GE and ABB, the world's largest supplier of power grids, have been finalizing contractual agreements for the supply and services of future equipment, the people said, and talks could still be delayed or fall apart.

The EntellEon low-voltage power panel and other innovative GE products could soon belong to ABB.

ABB doesn't comment on rumors and speculation, a spokesman said. A GE spokesman also declined to comment.

Shares of ABB fell 0.5% to 23.85 Swiss francs at 2:38 p.m. in Zurich, giving the company a market value of 51.7 billion francs ($53.3 billion). GE shares rose less than 1% to $24.81 before the start of regular trading in New York.

Circuit Breakers

Flannery, who handled mergers and acquisitions for GE in 2013 and 2014, has said he'll outline his plans for the Boston-based company and its portfolio in November. Under former CEO Jeffrey Immelt, the maker of gas turbines, jet engines and ultrasound machines tilted toward equipment manufacturing in recent years while jettisoning most finance and consumer operations.

Industrial solutions, one of GE's smaller and less glamorous divisions, sells electrical-distribution products such as circuit breakers and switchgear. The business has about 13,000 employees.

The sale is part of a broader reorganization of GE Energy Connections & Lighting, the company's least-profitable unit last year with margins of 2.1%. GE has also put its iconic light-bulb manufacturing operations on the market. The company is combining energy connections with GE Power.

GE has said the industrial solutions deal would probably close this year or in early 2018.

ABB Portfolio

ABB is trying to strengthen its portfolio after wrapping up a four-year restructuring plan during which it regrouped operations and resisted pressure from activist Cevian Capital AB to break up its businesses. 

Since 2010, ABB has funneled around $11 billion in capital into its U.S. operations, and the GE deal would bolster the Swiss company's footprint in North America. ABB bought an Austrian industrial-software company for about $2 billion in April to plug a gap in its automation business.

Organic growth will be the focus for ABB in future, with acquisitions a possibility, CEO  Ulrich Spiesshofer told Bloomberg in an interview in Shanghai on Sept. 16.

 

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