GE May Sell Electric-Parts Distributor for $700 Mln, People Say

Tuesday, November 15, 2005

Nov. 15 (Bloomberg) -- General Electric Co., the world's biggest company by market value, plans to seek buyers for an electrical-parts distribution unit as it exits slow-growing businesses, people familiar with the matter said.

A sale of GE Supply may raise as much as $700 million, said the people, who declined to be identified because no announcement has been made. The unit generates about $70 million of earnings before interest, tax, depreciation and amortization, they said.

GE Chief Executive Officer Jeffrey Immelt has sold dozens of businesses since he took over in 2001 to focus on more profitable units such as medical-imaging equipment. GE Supply, formed in 1929 and based in Shelton, Connecticut, sells electrical products such as light fixtures from GE and more than 200 other manufacturers to customers including commercial- building contractors.

``GE is concentrating on higher-tech businesses and this is more of a distribution business,'' said Mark Demos, an analyst at Fifth Third Asset Management in Cincinnati, which owns about 13 million General Electric shares. ``There's not a lot of value GE can add to that business.''

Kim Freeman, a spokeswoman for Fairfield, Connecticut-based GE, declined to comment.

Companies that compete with GE Supply or buyout firms that value steady cash flow may be interested in buying the business, said Fifth Third's Demos, who declined to name potential suitors. Demos said he didn't know whether GE Supply was for sale.

Immelt's Strategy

Clayton, Dubilier & Rice Inc., a New York-based buyout firm, and Wesco International Inc., a competitor of GE Supply, have bought electrical-distribution assets this year. James Rogers, a former GE executive now at Clayton Dubilier, and Stephen Van Oss, Wesco's chief financial officer, didn't return calls seeking comment.

GE Supply has more than 150 locations in the U.S., Puerto Rico, Mexico and elsewhere, according to its Web site.

Immelt may sell GE units involved in the manufacturing of appliances, plastics and equipment leasing, and use the proceeds to buy back shares, wrote Nicholas Heymann, an analyst at New York-based Prudential Equity Group, in a Sept. 14 note to clients.

Selling Stakes

GE plans to save as much as $1.2 billion in 2006 by combining operations into six divisions from 11. Immelt has raised more than $25 billion selling satellite, electric-motor, industrial-diamond and other businesses. The company on Sept. 21 sold about half of its 52 percent stake in insurer Genworth Financial Inc. for $2.36 billion and plans to sell the rest by the end of 2006.

Consolidation in the electrical-parts distribution industry has picked up this year, with Paris-based Rexel SA's acquisition by a Clayton Dubilier-led group for about $3.5 billion and Wesco's purchase of Carlton-Bates Co. for $250 million. Until 1994, Pittsburgh-based Wesco was part of GE rival Westinghouse Electric Corp.

GE Supply's biggest competitors are closely held Graybar Electric Co., with $4.08 billion of 2004 sales, followed by Wesco, with $3.74 billion, and Anixter International Inc. at $3.28 billion, wrote Curt Woodworth, an analyst at New York- based JPMorgan Chase & Co., in a Nov. 3 research report.

GE doesn't disclose results for the supply unit."