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GE`s $45bn Honeywell deal may hit anti-trust snags

01 December, 2000

General Electric is buying Honeywell for $45bn - the biggest deal in GE`s history. But the deal, agreed in three days after GE outbid a previous offer by United Technologies, could fall foul of anti-trust authorities in the US and Europe.

GE chief executive Jack Welch, who is postponing retirement to oversee the takeover, has been at pains to point out how well the two companies fit each other and how few overlaps there are in their product portfolios.

"Honeywell`s core group of businesses - avionics, automated controls, performance materials and its new microturbine technology - are a perfect complement to four of GE`s major businesses," Welch said, when the deal was announced. "Not only are the businesses a perfect fit, but so are the people and processes." Although there was a 90% overlap between the companies` activities, he added, there was none in their product portfolios.

But Welch`s hope that the deal will be concluded by early next year may prove optimistic as the antitrust authorities will want to examine the deal in detail. Concerns have already been raised about possible problems in the avionics sector where the combined operation could become a dominant supplier of aircraft engines and other aviation hardware.

In the automation and controls sector, the two businesses appear to be a good fit with GE`s strength in discrete manufacturing (through its PLC, CNC, drive and motion control products) being balanced by Honeywell`s strength in process control.

Larry O`Brien, director of research at the ARC Advisory Group, says that the combined organisation will be able to address all levels of automation "from the sensor level to advanced control and enterprise software". GE-Honeywell`s only competitors spanning both the process and discrete automation markets will be ABB and Siemens, he adds.

The deal could have implications for the existing alliance between Rockwell and Honeywell for PlantScape hybrid control systems. O`Brien suggests that Honeywell may drop Rockwell`s ControlLogix platform in favour of GE Fanuc hardware.

GE Fanuc`s recent deal to become Invensys` preferred global supplier of PLCs could also be affected. Invensys is an arch-rival of Honeywell.

O`Brien sees GE`s presence in the drives business as presenting Honeywell with "the unique opportunity" to develop an integrated control and drives package for the pulp and paper, and metals industries. Honeywell could also work with GE Plastics which presently uses mainly Invensys and Yokogawa controls.




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