GE Wins EU Approval For $11.6 Billion Sale of Plastics Unit
General Electric won EU approval Friday to sell its plastic division to petrochemicals manufacturer Saudi Basic Industries for about $11.6 billion.
The European Commission found no antitrust problems with the transaction, saying the companies' product ranges were complementary -- with SABIC focusing on raw materials and GE Plastics specializing in refined "engineering plastics."
Regulators also looked at how the deal might affect the supply chain but said neither was important enough as a supplier or a customer to shut off access to supply or demand to rivals.
GE Chairman and Chief Executive Jeff Immelt has described the divestiture as an important step in the company's strategy to sell slower growth units, such as insurance, so it can invest in high-growth, high-technology businesses like health care and water processing technology.
The deal is expected to create a net gain, after taxes, of $1.5 billion.
GE, which is the parent company of CNBC, said in May that it would use the proceeds from the sale primarily to increase its planned stock buyback program to $7 billion to $8 billion.
The unit supplies plastic resins to the automotive, health care and consumer electronics industries. It has struggled since 2004 due to rising costs of natural gas and raw materials. Profits for the division fell by 22% to $674 million in 2006.
SABIC intends to expand the business globally and is not planning to cut jobs, company officials said. The deal is expected to close in the third quarter.