United Tech to Buy GE Security Unit for $1.82 Billion - Companies * US * News * Story

Runway Angels
The superbowl of fashion shows, models walk down the runway at the 2009 Victoria's Secret Fashion Show.
The Richest Members of the US Congress
Recently, the Center for Responsive Politics found that there are 237 millionaires in the US Congress.
10 Tips to Get Out of Debt
Renowned financial author Gail Vaz-Oxlade takes a tough-love approach to helping couples in a financial crisis to face reality.

FEATURED QUIZZES

How Much Do You Know About Green?
Green has become part of our everyday lives. Green is everywhere-- energy, clothing, food, housing, transportation. It's a big business and a global business.
The Billionaire BFF's
Philanthropists. Bridge partners. Hockey players. Which responses are based on facts from Buffett's and Gates' real lives?
The Many Myths of Coca-Cola
Can you tell which statements are true, and which ones are just rumors?

SPECIAL REPORTS

Winterizing Your Portfolio
If 2009 was the winter of our discontent, will 2010 be a winter wonderland for investors? A lot depends on the recovery—or lack thereof.
Investor's Guide to Real Estate
Some even say the long-awaited recovery is here. Regardless, buyers and sellers alike can profit from our guide.
Alternative Investing
Stocks and bonds? Sure. But it's a big world out there for investors.

CNBC ON DIGG

United Tech to Buy GE Security Unit for $1.82 Billion

Published: Thursday, 12 Nov 2009 | 1:05 PM ET

Text Size

By: Reuters

General Electric will sell its security business to United Technologies for $1.82 billion, a deal that marks a step in the largest U.S. conglomerate's portfolio streamlining.

GE [GE Loading... () ], which stumbled financially last year in the face of a severe economic downturn, is in the process of pruning its diverse stable of businesses, including trimming its GE Capital finance arm and considering the possibility of taking on another partner for its NBC Universal media arm.

For United Tech [UTX Loading... () ], the world's largest maker of elevators and air conditioners, the deal greatly boosts its presence in the U.S. security market — selling products like security cameras and fire-detection systems for homes and offices.

The purchase will be neutral to diversified U.S. manufacturer United Tech's 2010 earnings, after restructuring and transaction costs and will add to earnings in 2011 and beyond helped by cost cuts, United Technologies' Chief Executive Louis Chenevert said in a statement on Thursday announcing the transaction.

RELATED LINKS

The security business is on track to generate about $200 million in earnings before taxes, interest, depreciation and amortization on $1.2 billion in revenue this year, United Tech disclosed in slides on its Web site.

GE Security, part of GE Technology Infrastructure, has about 4,700 employees in 26 countries.

Fairfield, Connecticut-based GE could sell off businesses generating $25 billion to $30 billion in revenue — about one-fifth of its operations — over the next two to three years, Bernstein Research analyst Steven Winoker wrote in a recent note to clients.

"While the sale reinforces that some of the company's longer-term growth investments have not worked out as anticipated, we think that point is moot for now, overshadowed by the cash that comes in the door, which the company can contribute to GE Capital," J.P. Morgan analyst Stephen Tusa wrote in a note to clients.

'Good Fit' for United Tech

Analysts said the move looked to be a good one for Hartford, Connecticut-based United Tech, which has been building its presence in the security sector over the past decade through a series of acquisitions.

"We see the business as a good strategic fit for UTC Fire and Security; the company had very little exposure to the North American Fire & Security market," Deutsche Bank analyst Nigel Coe wrote in a note to clients.

Ari Bousbib, who serves as president of United Tech's commercial companies — Carrier air conditioners, Otis elevators and the fire and security arm — said United Tech aimed to expand the business model of the security businesses it was buying from GE to include a stronger service element, not just product sales.

Winterizing Your Portfolio - A CNBC Special Report

It also plans to close about 40 percent of its branches, so that each location will provide fire, security and fire-extinguisher services, rather than having separate locations for each business.

United Tech executives have repeatedly told investors this year that they aimed to take advantage of the worst recession the United States has experienced since the Great Depression of the 1930s to find takeover targets at attractive prices.

GE shares were down, while United Tech rose on the New York Stock Exchange.

This marks the first time United Tech has bought a unit from GE since 2001, when GE tried to box out United Tech in a bid for Honeywell International [HON Loading... () ], a United Tech spokesman said. GE successfully outbid its Connecticut rival but the deal was ultimately quashed by regulators.