GE to Take $4-Billion Charge From Honeywell Acquisition

General Electric Co. said it will take $4 billion in pretax charges for the purchase of Honeywell International Inc. and raised its estimated annual savings from the acquisition by two-thirds to $2.5 billion.

Honeywell said Tuesday that its fourth-quarter profit would be below forecasts and it will take as much as $425 million in pretax charges in the period, in part from a decision to cancel the sale of some units after the $54-billion transaction was agreed upon.

The revisions come less than two months after GE Chief Executive John F. Welch Jr. broke up a merger between Honeywell and United Technologies Corp. to buy the company. Welch said at the time that the addition of Honeywell was too good to pass up and forecast $1.5 billion in annual savings.

General Electric shares fell $2.50 to close at $52.81, and Honeywell dropped $3.06 to close at $52.13, both on the New York Stock Exchange. GE, based in Fairfield, Conn., is paying 1.055 shares for each Honeywell share and is assuming about $3.4 billion in debt.

The purchase will add 11 cents a share to profit in the first year and 17 cents in the third year after the acquisition is completed, even if there isn’t any growth at the Honeywell businesses, Welch said.

“If we got 10% earnings growth, which we think is in the cards, we’d get 12 cents in the first year and in year three, 19 cents,” Welch said. That would increase General Electric’s growth rate to 20% from the current forecast of 18%, he said.

Still, some analysts said the lower-than-expected results at Honeywell may weigh on General Electric’s shares for a while. The transaction is expected to be completed in the first quarter. All the charges won’t be taken in the first year after the acquisition is completed.

Excluding Honeywell, General Electric expects profit to rise 19% to $12.7 billion, or about $1.27 a share this year, on $130 billion in sales, and to be about $1.50 a share in 2001.

The earnings forecasts are in line with the average estimates of analysts surveyed by First Call.