GE agrees to purchase Smiths Aerospace for $4.8B

General Electric Company announced January 15 that it agreed to purchase Smiths Aerospace, a United Kingdom-based supplier of integrated systems for aircraft manufacturers and components for engine builders, for $4.8 billion in cash. The deal is subject to approval by Smiths Group shareowners as well as customary regulatory reviews.

The acquisition will broaden GE’s offerings for aviation customers by adding Smiths innovative flight management systems, electrical power management, mechanical actuation systems and airborne platform computing systems to GE Aviation’s commercial and military aircraft engines and related services.

“Smiths Aerospace is a world-class business and a great extension of our Aviation business,” GE chairman and CEO Jeff Immelt said. “Like GE, Smiths has built its business by investing in technology and innovative products and services. GE and Smiths fit together well because our product offerings are complementary, and because we have similar customers and deep domain expertise in this industry.

“This acquisition is consistent with our strategy to invest in high-technology infrastructure businesses that deliver strong growth, earnings expansion and higher margins. 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.”

Smiths Aerospace, which is part of Smiths Group, has more than 11,000 employees and had $2.4 billion in revenues in 2006. Smiths has a significant presence on most commercial aircraft, including the Boeing 737 and Airbus A320, as well as many military aircraft. More importantly, Smiths has a major presence on new aircraft such as the Boeing 787, Airbus A380 and the Joint Strike Fighter.

Smiths products include flight management systems, airborne platform computing systems, power generation, conversion and distribution products, actuation products and systems for flight control, thrust reversers and landing gear applications, various engine components and a global customer services organization.

Smiths Group chief executive Keith Butler-Wheelhouse said, “The Board of Smiths Group is delighted to have reached agreement on the sale of Smiths Aerospace to GE. The consideration reflects the future potential of Smiths Aerospace, which has been created by intense investment in technology over the past five years and by the successful efforts of the dedicated Smiths Aerospace employees.”

GE Aviation is headquartered in Evendale, Ohio, has 26,800 employees and had $13.2 billion in revenues in 2006. Its products include jet engines for civil and military aircraft, as well as aeroderivative engines for marine applications. GE Aviation also operates a worldwide network of engine services facilities.

GE Aviation president and CEO Scott Donnelly said, “The acquisition will broaden our collective expertise. Smiths has made significant investments in its aerospace technologies with resulting success on several exciting new aircraft. Together, we will bring greater product scope and value to our customers.”

Detection Joint Venture  
GE also announced January 15 that it has signed a letter of intent with Smiths Group to create a detection joint venture with a portion of its Security business. The JV will include GE Security’s Homeland Protection business and Smiths Detection. Upon completion of the transaction, GE will own 36 percent and Smiths 64 percent of the joint venture and both companies will have board representation, with Smiths having a majority. The definitive agreement is expected to be signed in the second quarter. The transaction will be subject to approval by Smiths shareowners as well as customary regulatory reviews and will be conditioned on the completion of GE’s acquisition of Smiths Aerospace.

Louis Parker, president and CEO, GE Security, said, “Today’s announcement is a big step in aligning our detection team with a business that has complementary technologies and creates a joint venture that will be able to offer a full-service suite of detection solutions on a global basis.”

Immelt said, “We continue to believe security is a great long-term growth opportunity for GE. We have deep technical expertise and are experiencing strong growth in our security platform. This joint venture enhances our long-term position in the industry.”

The joint venture, to be called Smiths GE Detection, will be headquartered in London. Keith Butler-Wheelhouse will serve as the chairman of the board. Stephen Phipson, currently group managing director of Smiths Detection, will serve as the president.

Butler-Wheelhouse said, “Together we are creating a world-class business. GE’s Homeland Protection business has a terrific leadership team, committed employees and exciting technology. Our combination of technologies will result in the development of more effective products and services to help make the world a safer place.”

Smiths Detection is headquartered in London, U.K., has about 2,000 employees and had about $700 million revenues in 2006. GE Homeland Protection is headquartered in Newark, Calif., has about 700 employees and had about $300 million in revenue during the year.