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, which creates one of the world’s largest industrial companies.
The agreement, signed on Sunday October 22, is the result of last minute negotiations by GE, which halted the plans of industrial conglomerate United Technologies to buy Honeywell for approximately $40 billion.
United Technologies called off its negotiations on Friday, October 20, after Honeywell revealed it was talking to another company.
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 of business. GE’s valuation of Honeywell represents a ten- percent premium over United Technologies’ bid.
Under terms of the deal, GE will also assume an unspecified amount of Honeywell debt. Honeywell’s corporate headquarters in will be closed as part of the deal and about 550 employees there may lose their jobs, said Honeywell spokesman Tom Crane.
GE expects the acquisition of Honeywell to boost its earnings per share by double figures in the first full year, excluding any one-time charges.
GE, a company with anticipated 2000 revenues of $130 billion, has been remaking itself since the 1990s into a major player in financial services, business consulting and equipment maintenance markets, with 70 percent of sales coming from these sources.
Overlap in some areas of business may raise antitrust concerns among US and European regulators, who could require the newly merged company to divest some of its businesses as a condition of approval.
The two companies are partners on projects such as a $196 million contract to develop gas turbine engines for US Army battle tanks and an artillery system, and on a deal with Fortune Electric to develop lighter and cheaper electrical distribution transformers.