When I interviewed General Electric Co. (NYSE: GE) CEO Jeff Immelt at the company’s annual meeting in Houston earlier this year, there were two key things that stood out on top of the recovery that was taking place at the company. First was that the conglomerate was going to get the checkbook out to raise its dividend again and then that it would begin buybacks of common stock again. But the larger standout was that GE was going to look for solid bolt-on acquisitions that could be easily integrated into GE units that offered growth ahead. GE has just taken out its checkbook to make acquisitions.
Today’s larger deal is an acquisition of privately held Dresser, Inc. for right at $3.0 billion. Dresser is a diversified supplier to the energy infrastructure value chain. Dresser is known for advanced technologies for gas engines, flow management technologies for gas and oil through pipelines, and for measurement and distribution solutions that increase efficiency. It also has about 6,300 workers and customers in 150 countries. The company generated roughly $2 billion in revenues and $318 million in earnings in 2009, and GE noted that 60% of its revenues come from outside North America.
GE also announced this morning a deal with Citigroup, Inc. (NYSE: C) whereby GE would acquire a $1.6 billion Citi retail sales portfolio. Unfortunately, financial terms here were not disclosed. The company noted that this is “right in line with GE Capital’s goal to invest in high-performing growth businesses where we have domain expertise and opportunity to grow.”
Another deal is one which did not occur, but one which GE was trying to make. General Electric had made a proposal to acquire an overseas operation called Wellstream Holdings plc in a deal that would have valued Wellstream at around 750 million pounds or 750 pence per share in London. Wellstream’s board of directors rejected the proposed takeover. Wellstream is a British supplier of subsea pipes and it sells to the offshore oil industry.
General Electric has also recently announced a deal where it was acquiring substantially all assets of Calnetix Power Solutions, also with financial terms undisclosed. This Calnetix operation provides technologies that generate power and electricity from the waste-heat of biomass boilers, engines and gas turbines. Calnetix is going to be integrated into the Jenbacher unit under the gas engine business.
This is not a merger, but perhaps may be viewed as a cheaper way around a merger. It is also perhaps the only way that a deal can be done in China. Last week came the announcement that GE formed a joint-venture to manufacture and supply wind turbines to customers in China.
There is another fairly recent transaction that GE made in media, but this is something which should be considered part of a broader deal in the NBC Universal deal with Comcast Corp. (NASDAQ: CMCSA). Vivendi SA closed the sale of its 7.66% stake in NBC Universal at the end of September to GE in a deal that was to be valued at $2 billion. This was part of an agreement covering Vivendi’s exit from its position in NBC Universal; Vivendi is expected to sell the rest of its stake for about $3.8 billion to GE after the deal between GE and Comcast closes.
Jeff Immelt said in our interview that the company was happy with its portfolio earlier this year. He did, however, note that there was an opportunity for bolt-on acquisitions and he used the term ‘adjacencies’ in discussing acquisition targets. He commented on a snap-back in financial services, healthcare, energy, and batteries.
Many companies out there, both public and private, are wanting to close sales before the end of 2010 so that they know what their effective tax rates will be on capital gains and to capture what are the cheapest capital gains rates that may ever be seen in our lifetimes. GE has its checkbook out.
JON C. OGG