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The GE machine is back
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December 18, 2001: 4:43 p.m. ET
Growth targets are on the rise and new CEO Jeff Immelt is taking advantage of the weak economy to scoop up bargains.
By Luisa Beltran
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NEW YORK (CNN/Money) - General Electric Co., which failed in its $42-billion takeover of Honeywell International, is now launching an aggressive acquisition hunt and is looking at 400 potential purchases.
GE CEO Jeff Immelt, speaking before analysts in New York, said the weak economy has created buying opportunities. However, the CEO doesn't expect a turnaround until 2003, a spokesman confirmed.
But even with the downturn, Immelt still laid out plans for an aggressive acquisition strategy. Fairfield, Conn.-based GE (GE: up $1.42 to $39.72, Research, Estimates), the largest company by market capitalization, is a diversified industrial, media and financial services conglomerate. GE, or its financial arm GE Capital, historically has been very acquisitive, averaging 100 buys each year for the past four years.
Now 400 different companies fit GE's strategy, a spokesman said.
"It's notable that GE believes that there are many good values out there," said analyst Todd Hinrichs of ABN AMRO. "They have a lot of capacity right now and businesses are a better deal now because the economy is not doing well."
Possible transactions for GE include industrial companies with a combined $100 billion in revenue while GE Capital is looking at financial services companies with a total $300 billion in assets, the spokesman said.
Despite the economic downturn and the terrorism attack of September, GE is still financially strong. On Monday GE boosted its earnings estimates by 17 percent to 18 percent for 2002 to $1.65-$1.67. Earnings tracker First Call expects $1.58 a share for the year.
GE also sees double-digit earnings growth through 2003.
In September, Immelt assumed the Chairman and CEO positions at GE when renown executive Jack Welch retired after 20 years spent at the helm.
News of GE's expansion strategy and positive growth estimates caused shares to gain more than four percent Tuesday.
Boosting NBC through buys
But GE has suffered some setbacks. Last summer, European regulators blocked GE's $42 billion attempt to buy rival Honeywell International Inc.
In one swoop, a purchase of Honeywell would have given GE an array of aerospace, power and transmission products. Since it lost on Honeywell, GE now has the war chest to be more aggressive, analysts said.
GE produces $15 billion in free cash a year and pays out about $7 billion in yearly dividends. So the industrial conglomerate theoretically has about $8 billion to $10 billion to spend on acquisitions, said analyst John Inch of Bear Stearns.
"Plus they have stock to spend and they could assume debt," he said. "That's an enormous amount."
In the past week, GE or one of its companies, has engaged in four different acquisitions. GE on Tuesday agreed to buy Interlogix Inc., an electronic security company, for $777 million in cash and stock.
GE Power Systems bought some assets from Honeywell on Monday, while NBC, a GE-owned network, agreed to buy a San Francisco-area station.
GE Capital also inked a deal to buy Security Capital Group Inc. for about $4 billion earlier this week.
GE will probably not be looking to grow its lighting, appliances or industrial systems businesses but will instead focus on bolstering the NBC network, Bear Stearns's Inch said.
Immelt said Tuesday GE hopes to expand the network through acquisitions but not through any transactions involving cable, satellites or studios.
Instead, GE will probably look to take an equity interest in possible companies and not take ownership outright, Inch said. In October, NBC inked a deal to buy Telemundo Communications Group for about $1.98 billion in cash and stock.
GE, which hopes to become a financial, industrial and entertainment conglomerate, will consider smaller deals on a par with the Telemundo transaction.
"GE will not go out and buy a blockbuster company," Inch said.
Next year, GE will also consider acquisitions to strengthen engine services, medical systems and power systems units, Immelt said. 
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