GE agrees to sell plastics unit

General Electric Co. said Monday that it would sell its plastics division for about $11.6 billion in the latest move to reshape one of the world’s largest companies.

GE said it would use the proceeds from the sale to petrochemical manufacturer Saudi Basic Industries Corp. primarily to increase its planned 2007 stock buyback program. It now expects to buy back $7 billion to $8 billion in stock, up from the previous plan of $6 billion.

The deal is expected to create a net gain, after taxes, of $1.5 billion for the Fairfield, Conn.-based conglomerate.

GE Chief Executive Jeff Immelt called the long-expected divestiture “another important step” in the company’s strategy to sell slower-growth businesses, such as insurance, so that it can invest in high-growth, high-technology businesses, such as healthcare and water-processing technology.

GE’s plastics division dates to 1930, resulting directly from Thomas Edison’s experiments with plastic filaments for light bulbs in the 1890s.

GE Plastics, located in Pittsfield, Mass., supplies plastic resins to the automotive, healthcare and consumer electronics industries. It employs 10,300 people and GE values the business at about $6.65 billion.

The division has struggled since 2004 because of rising costs of natural gas and raw materials. Profit for the division fell 22% in 2006 to $674 million.

Saudi Basic intends to grow the business globally and is not planning workforce reductions.

Shares of GE rose 14 cents to $37.10.