GE acquires Smiths Aeropsace for $4.8 billion

General Electric will purchase Smiths Aerospace, a United Kingdom-based firm that specializes in integrated systems and components for aircraft manufacturers, for $4.8 billion (2.4 billion pounds). Also, GE and Smiths will form a joint venture to combine their respective homeland protection and global detection divisions, company officials announced Jan. 15.With this move, GE will add Smiths' capabilities, which include flight management systems, electrical power management, mechanical actuation systems and airborne platform computing systems. Also, GE will consolidate several efforts on projects that involve Smiths, including the new Boeing 787 and the Airbus A350. Smiths also contributes to the F-35 Joint Strike Fighter.The acquisition takes GE beyond the jet engine area, according to Jeffrey Immelt, chairman and chief executive  officer of GE. “We think this is a natural strategic extension of our long-term strategy in the aviation industry,” he said.GE is not new to the U.K.  market. The company has invested more than 10 billion pounds ($19.6 billion) there since 2000, Immelt said. He added that GE plans to continue to make inroads into the European defense industry and in other locations.Smiths sold its Aerospace unit despite the strength of the industry to create shareholder value, said Keith Butler-Wheelhouse, CEO of  Smiths Group. The company will return 2.1 billion pounds ($4.1 billion) directly to shareholders. Smiths decided last year to sell the division and then sought buyers, he said.Both companies hope to complete the deal by the second quarter of 2007. The European Union prevented GE from acquiring British-owned Honeywell in 2001.Separately, the new joint venture will combine GE Security’s homeland protection business and Smiths' Detection, with Smiths retaining 64 percent ownership and a majority on the board of directors, according to the signed letter of intent. The joint venture, Smiths GE Detection, will be headquartered in London.GE Aviation is based in Evendale, Ohio, has 26,800 employees and had $13.2 billion in revenues in 2006. Smiths Aerospace has more than 11,000 employees and had 1.22 billion pounds ($2.4 billion) of revenue in 2006.