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GE close to selling industrial unit to ABB

NEW YORK

General Electric (GE) is nearing an agreement to sell its industrial-solutions business to ABB in a deal valued at $2.5 billion to $3 billion, people with knowledge of the matter said.

The American and Swiss companies are likely to announce an agreement by next week, said the people, who asked not to be identified because talks are private. ABB doesn’t comment on rumors and speculation, a spokesman said. A representative of GE didn’t immediately reply to a request for comment.

The decision caps a months-long bidding process after GE put the electrical-products unit up for sale in December. The two companies have been finalising contractual agreements for the supply and services of future equipment, the people said, and talks could still be delayed or fall apart. The sale is poised to be the first major portfolio change under GE’s new chief executive, John Flannery, who took the reins Aug. 1. Under former CEO Jeffrey Immelt, the Boston-based company tilted toward high-margin equipment manufacturing in recent years while jettisoning most finance and consumer operations.

Flannery, who handled mergers and acquisitions for GE in 2013 and 2014, is looking to strengthen operations and boost a lagging stock price as shareholder Trian Fund Management pressures the company to improve performance. GE agreed in March to deepen its cost-cut targets after consulting with Trian, an activist investment firm co-founded by Nelson Peltz. Flannery has said he’ll lay out his plans for GE and the portfolio in November.

Industrial solutions, one of GE’s smaller and less glamorous divisions, sells electrical-distribution products such as circuit breakers and switchgear. The business has about 13,000 employees.

The sale is part of a broader reorganisation of GE Energy Connections & Lighting, the company’s least-profitable unit last year, with margins of 2.1 per cent. Besides unloading that division’s industrial-solutions business, GE has also put its iconic light-bulb manufacturing operations on the market. The company is combining energy connections with GE Power.

GE has said the industrial solutions deal would probably close this year or in early 2018. Proceeds from the sale and from the disposal of a separate water unit will be used to fund restructuring, the firm has said.

Agencies