GE, Smiths form joint venture

Thursday, March 1, 2007

FAIRFIELD, Conn. and LONDON--General Electric and Smiths Group announced in January a letter of intent to form a joint venture, to be called Smiths GE Detection, which will join GE Homeland Protection and Smiths Detection, and be owned 64 percent by Smiths and 36 percent by General Electric. Stephen Phipson, currently group managing director of Smiths Detection, will serve as Smiths GE's first president.
GE Homeland Protection and Smiths Detection are leading manufacturers of scanning devices used in airports and other screening applications. GEHP is a business unit of GE Security, a wholly owned subsidiary of General Electric. Currently, 730 of GE Security's 6,500 employees work in Homeland Protection, focusing on explosives and narcotics detection.
Louis Parker, president of GE Security, is excited by the possibilities created by the joint venture. "If you look at Smiths, just about all of their business is government business," said Parker, "and very little commercial business, if any at all. On the other hand, only about 20 percent of our business is government, so there's an opportunity where we'll be able to bring homeland security-type products that are created by that joint venture into commercial opportunities."
As an example, he said channel partners have found success selling desktop narcotic and explosion detection devices into the education vertical. "As we continue to expand chem/bio applications with Smiths," said Jordan, they'll have more products to take to market.
The Smiths GE board will be chaired by Keith Butler-Wheelhouse, the chief executive of Smiths. Four other Smiths representatives and two GE representatives will complete the board.
While joint ventures are relatively rare in the security industry, GE vice chairman and architect of GE's entry into the security field Lloyd Trotter said joint ventures have worked well for GE over the past quarter century. Its aviation division formed a JV with Snecma Moteurs in 1974 to build engines; its consumer finance division formed a venture with Turkey's Garanti Bank in August 2005; and in the fourth quarter of 2006, its nuclear division announced an agreement with Hitachi to build nuclear plants in the United States and Japan.
"It's got to make sense," said Trotter of the thought behind entering into a joint venture. "Each partner has to bring something to the table ... It's been a home run for us in the past." Still, Trotter admitted, "generally we don't think JV, we think about how to go and buy them. If we had our druthers, would we have liked to do an acquisition here? The answer is yes."
With this joint venture, however, "I think everybody wins," said Trotter. "When we grow, we grow with our channel partners ... Our channel partners have a lot to be excited about."