GE Industrial Moves to Phase 2 in Sale

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GE Industrial SaleThe auction of GE Industrial Solutions has moved to the next phase according to a Reuters story. As many know, it was put on the block in mid-December and acquirers lined up to receive “the book” last month. Many are “kicking the tires” and the industry is rift with rumors of who is interested.

We’ve heard of about 10 private equity firms of which some have former GE and other industry executives involved. We’ve also heard a Chinese company had interest, possibly one or two South Korean companies, ABB and Schneider Electric and possibly a few others. Many in the industry have been contacted as bidders seek to do their due diligence.

The Reuters article stated:

European engineering groups ABB Ltd (ABBN.S) and Schneider Electric SE (SCHN.PA) are competing for General Electric Co’s (GE.N) industrial solutions division, which could fetch as much as $3 billion, according to people familiar with the matter.

The divestiture would represent a key step by GE to focus on its core businesses and improve its operational performance, amid pressure from Nelson Peltz’s activist hedge fund Trian Fund Management.

ABB and Schneider Electric are through to the second round of bidding for GE’s industrial solutions business, a provider of primarily electrical equipment, the sources said this week. Schneider Electric is looking for a partner to break up the business should its bid prevail, in order to address any antitrust concerns, the sources added.

Private equity firms, including KKR & Co LP (KKR.N), Clayton Dubilier & Rice LLC, Warburg Pincus LLC and Onex Corp (ONEX.TO), are also in the running, according to the sources.

The sources asked not to be identified because details of the sale process are confidential. Schneider Electric declined to comment, while GE, ABB, KKR, Clayton Dubilier & Rice, Warburg Pincus and Onex did not immediately respond to requests for comment.

Additionally, while all of these private equity firms have no problem raising money, we know that Clayton Dubilier & Rice (CDR) has experience in the electrical distribution industry having been involved with WESCO, Rexel and HD Supply and knows the space and has recently raised a $10 billion fund. And while GE would like to raise $3 billion, private equity firms never pay “cash”.

It’s interesting to see Schneider and ABB reportedly making it to the next round as many expected them to request the book so that they could get an inside peek at the business.  With GE having <10% (some sources say closer to 8% of the business), it’s a question of what Schneider would be interested in.  From an ABB viewpoint, some have told us there are product conflicts whereas others think it could help jumpstart ABB’s North American switchgear initiative (although they are actively recruiting salespeople / sales engineers) and it is an interesting question to ask how much of an overlap is there between Thomas & Betts and GE Industrial … would it be a good distribution fit.

Historically private equity firms bid more for a company than a “strategic” investor who may be more “informed” about a company. So, the question becomes … and please feel free to respond anonymously …

  1. Whom would you like to see win the business?  ABB? Schneider? A private equity firm?
  2. What do you think the winning bid will be?
    • And to make it fun, either post your number and name or email your name and number to me.  I’ll post the number, but not your name, and the person who comes the closest will win a $100 American Express gift certificate. Everyone is eligible but entries must be received by May 5th.
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