LONDON (AP) -- General Electric Co., the world's largest aircraft engine maker, agreed Monday to buy the aerospace business of Smiths Group PLC, Britain's third-largest aerospace company, for $4.8 billion in cash.þþSmiths will return $2.1 billion to shareholders, the London-based company said in a statement. GE and Smiths also announced plans for a joint venture called Smiths GE Detection.þþThe market reacted enthusiastically, pushing Smiths shares up more than 15 percent to 1,135 pence ($22.24) on the London Stock Exchange. The company has been under shareholder pressure to break itself up, but has resisted.þþFairfield, Connecticut-based GE said the purchases would broaden its aerospace portfolio by adding Smiths' flight management systems, electrical power management, mechanical actuation systems and airborne platform computing systems.þþ''GE Aviation is growing about 10 percent a year and this acquisition gives us a technology growth platform that will be accretive to our net income and will deliver immediate and future value for our investors,'' GE Chairman and Chief Executive Jeff Immelt said in the statement.þþSmiths Aerospace has more than 11,000 employees and posted revenue of $2.4 billion in 2006. It has been working on projects like Boeing's 787 aircraft, the Airbus A380 as well as the Joint Strike Fighter military project.þþSmiths will call an extraordinary shareholders meeting during the second quarter to approve the sale, which is also subject to regulatory approval.þþSpeaking on a conference call with reporters, Immelt said the acquisition complemented GE's existing business instead of being a consolidation, and he looked forward to ''a constructive process'' with EU antitrust regulators.þþThe European Union blocked GE's attempt to take over Honeywell in 2001, although the deal had been approved by U.S. regulators.þþSmiths Chief Executive Keith Butler-Wheelhouse said the decision to sell the aerospace arm was made last autumn.þþ''The structure of the aerospace industry is changing -- in particular its increased capital requirements and the growing importance of supplier scale, especially as the next generation of large programs kicks in.''þþButler-Wheelhouse said he had approached GE about buying its Homeland Protection unit during the aerospace negotiations, but was turned down.þþThe new Smiths GE Detection joint venture will combine Smiths' Detection operations with GE Homeland Protection. Smiths will own 64 percent and GE will have 36 percent, with the partners committed to holding those stakes for at least five years.þþ''Our combination of technologies will result in the development of more effective products and services to help make the world a safer place,'' Butler-Wheelhouse said.þþThe joint venture will have pro-forma annual revenue of about 600 million pounds ($1.2 billion).þþFortis Securities in London commented that the aerospace deal ''comes close to a complete break-up'' of Smiths.þþ''The aerospace division is extremely well-placed, having major contracts with Boeing, Lockheed Martin and others, but lacks scale for long-term independence,'' Fortis commented.þþButler-Wheelhouse said there are currently no talks to sell off the remaining Smiths units, but said ''we reconsider these things continuously.''þþBut Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said: ''With the group's conglomerate mode now truly broken, the shares will now almost certainly continue to court further rumor and speculation as to the next divisional sale.''þþ
Source: NY Times
