GE makes its move, to buy Interlogix
It would mark GE's first successful attempt to enter the security industry
PLAINVILLE, Conn.-The security industry soon may have its biggest player yet, if federal regulators approve General Electric's plans to buy security manufacturer Interlogix.
The $777 million deal would mark GE's first entrance in the security arena and could change the face of the security industry, according to some industry analysts.
"What's happening in the security industry is the big players are moving in and it's incumbent on many of the smaller companies to align themselves with larger parents to be able to have the leverage, the clout, the marketing and distribution power this brings," said Jack Mallon, from Mallon's Security Investing.
Austin, Texas-based Interlogix was created a little more than two years ago when holding companies SLC Technologies and ITI Technologies came together.
That alliance was in part done for the same reasons -- it leveraged ITI's residential security strength in North American and SLC's strong overseas base and commercial product lines. Today the company has annual revenues in excess of $600 million.
The GE and Interlogix deal, which is expected to close in the first quarter of this year, would provide GE with a line-up of some of the most well-known brands in the industry. The list includes ITI, Kalatel, Sentrol and Caddx.
Interlogix would then become part of the GE Industrial Systems division. But many questions remain about the deal, such as how GE will integrate Interlogix into its systems division and tap into security product expertise.
Company officials from both sides of the deals declined interviews, but in a press release, Lloyd Trotter, president and chief executive officer of GE Industrial Systems, said GE expects the demand for security products and systems to continue to increase. He also said he expects Interlogix's products will complement products manufactured by GE.
One thing is clear. It would make GE one of the three largest manufacturers of security products, a spotlight now shared by Tyco and Honeywell. Both are relatively new players in the security product manufacturing market, with Tyco coming on board through its recent purchase of Sensormatic and DSC. Honeywell, the veteran of the group, joined the ranks two years ago by buying the former Pittway Group of companies which includes Ademco and Northern Computers.
Ken Boyda, president and chief executive officer of Interlogix, expects Interlogix and GE will create a broad and diverse product portfolio together. He said Interlogix sees the strategic importance of "being part of a company that affords the benefit of size and scale."
Analysts expect that some of the benefits GE will provideto Interlogix include funding for future product research and development and a larger market to target.
"Manufacturers have been looking around for these large types of companies that can take them internationally," said Jeff Kessler, a business services analyst with Lehman Bros. with a specialty in security.
Frost and Sullivan analyst Girish Solanki concurred. "GE is active in 160 countries," he said. "By joining up with GE Industrial Systems Division, they'll have a much wider access to a sales and distribution network."