GE Security sells off a piece for $580m

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04/24/2009
Remember when GE Security tried to sell off a piece of its Homeland Protection business in a merger with Smiths Detection? Remember how that fell through? Well, looks like GE was determined to get this Homeland Protection biz off its hands:
GE ANNOUNCES AGREEMENT WITH SAFRAN FOR SAFRAN TO ACQUIRE A MAJORITY STAKE IN GE SECURITY’S HOMELAND PROTECTION BUSINESS
They're so excited about it they put the headline in ALL CAPS. As in, HOLY CRAP THIS IS EXCITING! I'm too lazy to go looking around for the link, but here's the press release they emailed out at 1:30 a.m.:
Newark, CA, April 24, 2009 – GE (NYSE: GE) announced today that it has signed a definitive agreement with SAFRAN for SAFRAN to acquire 81% of GE Security’s Homeland Protection business for $580MM. Upon close, GE will own 19% and SAFRAN will have majority interest with 81%. The transaction has been approved by the Boards of both companies, and will be subject to customary regulatory approvals.
Just as a matter of thinking out loud, is it at all weird that this Homeland Protection business, which supplies all manner of puffer machines and shoe analyzers (maybe they're the same thing), is being sold to a French company? I guess not. But there might be a regulatory hurdle or two that's a pain to jump over.
The Homeland Protection business will become part of SAFRAN’s Defense Security division of Sagem Securite, led by Jean-Paul Jainsky, Chairman and CEO, Sagem Securite. Dennis Cooke, will continue as President & CEO, for the Homeland Protection business and headquarters will remain in Newark, CA. “This is a great move for our Homeland Protection business,” said Dennis Cooke, President & CEO, GE Security Homeland Protection. “Our business has a strong leadership team, dedicated and talented employees, innovative technology, a large installed base and a strong brand. This move aligns Homeland Protection with a business that is committed to globalization and further investment in new detection technologies and new products for the Homeland Security space.”
Also, GE just got $580 million bucks in a crap economy, which shouldn't hurt the flagging stock price of the parent company.
The combined company will focus on identification solutions and detection offerings globally and will benefit from continued access to technology advancements from GE’s Global Research Center and GE Healthcare. The combination of the complementary technology of both businesses will provide customers with the benefit of new technology solutions to keep ahead of the changing threats. SAFRAN and GE are expanding their already strong relationship as the companies have been working together for more than 35 years to deliver Aviation technology solutions. The new entity will feature SAFRAN’s industry-leading ID management, plus Homeland Protection’s world-class aviation safety, checked baggage screening, military & critical infrastructure protection together with new growth platforms in Chem/Bio, X-ray and Radiation/Nuclear detection.
This is actually the interesting part. SAFRAN becomes an interesting player in the security market, where they've already been growing and making noise. But don't take my word for it:
Jean-Paul Herteman, CEO of SAFRAN, said: “Following our 2008 acquisitions of SDU-Identification (a Dutch manufacturer of secure passports and ID documents) and Motorola’s biometrics business (Printrak brand), adding GE Homeland Protection will significantly bolster our Group’s third core business. This makes SAFRAN a pivotal player in the security market, a business that will generate 20% of the Group’s total revenues in the medium term, with double-digit profit perspectives and reducing exposure to aerospace cycles. Furthermore, this transaction is the latest step in our long-standing relationship of mutual trust and partnership with GE that reaches back some 35 years.”
This guy thinks so, too:
Jean-Paul Jainsky, Chairman and CEO of Sagem Sécurité, added “There is growing demand from both governments and private industry for cutting-edge security solutions, based on long-term projects anchored in advanced, very-high-reliability technologies. From this standpoint, the SAFRAN Group is in a perfect position to meet today’s most demanding public security requirements.”
But what does Dean Seavers have to say about it?
“This newly combined company is an excellent fit for our Homeland Protection team,” stated Dean Seavers, President & CEO, GE Security. “GE Security will continue to focus on our core security product portfolio with a strong commitment to delivering security innovations that bring value, quality and high performance to our customers and end users.”
I wonder if GE doesn't think they've already sold most of the big-ticket scanners and what-not they're going to sell for a while, and now it's time to focus on the smaller, incremental items that their dealers can push out there for them. Considering their recent releases aimed more toward the lower end of the market, it seems like they're trying to generate more smaller customers rather than cultivate those few very large customers.

Comments

GE made a good move to get out of airport security which has not met its growth expectations. Doing so now when a buyer is willing to pay for their invested R&D is better than getting stuck in a business demanding high investment but that offers limited growth. Read more at http://www.ThePhoenixPrinciple.com