GE May Lose Out on Biggest Reason to Buy Honeywell
European antitrust regulators weighing General Electric Co.’s proposed takeover of Honeywell International Inc. have discussed requiring the divestiture of a large part of Honeywell’s aerospace operation--the very business that attracted GE in the first place, according to a source close to the talks in Brussels.
But negotiations are continuing and the source said the European Commission is not close to a decision on what divestitures it will ultimately seek to approve GE’s $42-billion acquisition of the company.
On the New York Stock Exchange, Honeywell fell $1.78, or 3.9%, to $43.47, after the Wall Street Journal reported that the commission is seeking a divestiture of more than half of its aerospace operations before approving the deal. The shares are still above their year low of $32.13 hit just before the GE deal was announced in October.
The sale of some aerospace operations is one of several options on the table, the source said. GE faces a Thursday deadline to submit a proposal to the European Commission.
“Our position is that we continue to work closely with commission officials, but we are not commenting officially on the details of the discussion,” GE spokeswoman Louise Binns said.
A requirement by the European Commission to sell a large part of Honeywell’s aerospace operations would probably kill the deal, analysts have said. Selling smaller operations, such as Honeywell’s helicopter or regional jet engine businesses, could be a more palatable option.
“I still think there is a middle ground to be found,” said William Fiala, stock analyst at Edward Jones. “GE has a lot of incentive to try to make this work, so I’m far from throwing in the towel on this deal getting done.”
The EU launched its extensive investigation of the GE-Honeywell combination in February.
The deal won approval from U.S. antitrust regulators in early May, conditioned on GE selling off Honeywell’s military helicopter-engine division and some civilian engine business and allowing a new company to service some of Honeywell’s small, commercial jet engines.
One veteran antitrust lawyer said that while the EU’s recent proposals caught many industry observers off-guard, GE, in retrospect, clearly took the EU’s role in the approval process too lightly.
Still, Wall Street analysts in large part say they expect GE and European regulators to find common ground and reach an agreement.
On June 25, European Commission staff will meet with representatives of competition agencies from European Union member states and present proposed actions.
The commission is expected to approve the recommendations of its competition department on July 4. Under commission rules, all decisions in the case must be made by a July 14 deadline.
GE closed up $1.37 at $48.77 on the Big Board, after sliding as low as $46.26.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Deal Doubts
Shares of Honeywell International fell 3.9% to $43.47 on concerns over new snags in its proposed acquisition by GE. The shares in May hit a high of $53.50. GE’s offer valued Honeywell at $55.12, or $45 billion, when announced in October.
Honeywell, weekly closes and latest on the New York Stock Exchange
Tuesday: $43.47, down $1.78
Source: Bloomberg News
