General Electric Co (GE) is seeking to sell its security unit, which builds surveillance cameras and alarms, and may fetch about $2 billion, people aware of the details said.
GE hired JPMorgan Chase & Co to find a buyer for most of GE Security, said the sources. Fairfield, Connecticut-based GE asked potential buyers to submit preliminary bids about a month ago.
Possible acquirers include Tyco International Ltd and United Technologies Corp, which also sell security equipment. GE may sell the unit in parts if it can’t find a buyer for the whole business, the sources added.
“The security industry is extremely fragmented, and that is clearly different from GE’s typical vision of being in a strong market-leadership position,” said Joel Levington, director of Corporate Credit for Hyperion Brookfield Asset Management Inc, New York.
Michelle May, a GE spokeswoman, declined to comment, as did Paul Fitzhenry of Schaffhausen, Switzerland-based Tyco; John Moran at United Technologies, based in Hartford, Connecticut, and JPMorgan’s Brian Marchiony.
GE fell 21 cents, or 1.5 per cent, to $14.09 at 3:39 pm in New York Stock Exchange composite trading after earlier dropping as much as 2 per cent. The shares declined 12 per cent this year through yesterday.
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GE Chief Executive Officer Jeffrey Immelt built the security division through acquisitions starting in 2002. GE Security projected $3 billion in sales by 2011, up from about $1.8 billion in 2007, Dean Seavers, the unit’s chief executive officer, said in an interview in September 2008.
Immelt has been putting greater emphasis on non-finance businesses while shrinking the GE Capital arm this year. Investors concerned that the finance unit may encounter losses have helped erode GE’s market value by half in a year.
Since 2003, Immelt has gotten rid of more than $50 billion in businesses and acquired more than $100 billion, eliminating divisions like plastics and adding to health care. Before the credit crisis began in 2007, he sold the US subprime-mortgage business, which catered to the least-creditworthy borrowers. Early in his tenure, he shed all of GE’s insurance divisions.
GE Security forecast an increase in sales, driven by demand in emerging markets and new offerings that bundle video surveillance, alarms and fire systems, the unit’s top executive said in September.
About 30 per cent of the division’s revenue comes from outside of North America, Seavers said. That should rise to about 50 per cent by 2011, led by faster-growing regions such as the West Asia and India.
GE agreed to sell an 81 per cent stake in a part of its security division, the Homeland Protection unit that sells technology for airports, to Paris-based Safran SA for $580 million in April.
It is difficult to comment on valuation of the unit without knowing its profitability, Levington said. One of the main businesses acquired to build the group was Edwards Systems Technology, purchased for about $1.4 billion from SPX Corp. in 2005. If the whole unit sells for $2 billion, GE may need to take an impairment to goodwill if it hasn’t written down the assets already, he added.
GE, the world’s biggest maker of power-plant turbines, had sales of about $183 billion in 2008.