JULY 2008 W2 ALERT
GE Shifts from Talking Sale to Talking Spin-Off
Some posit that auction failed
<Reuters><July 10, 2008>Reuters is reporting that GE is considering spinning off their entire consumer and industrial units to investors as a way to quickly right the ship after reporting a surprising drop in first quarter profits. This news follows reports from May that the company was offering its appliance division in an auction with multiple bidders.
Analysts are split on just what this turn of events indicates. Some are suggesting that this strategy shift indicates that the company is looking to quickly shake up their portfolio with a move that sidesteps a long auction process.
Yet others suggest that this means that the company’s auction process failed to attract bidders or perhaps reasonable offers. Either way, it is clear that the company is serious about making changes to address profitability and strategic issues.
The industrial division targeted for a potential spin-off represents about 10% of their total revenues of $172.4 billion. A monster manufacturing and services operation, many on Wall Street would like to see the company engage in some strategic divestitures or other actions to increase the focus on businesses with the best overall prospects.
“As we explored our options for appliances, it became clear that the fastest, most efficient step we could take in completing the transformation of our industrial portfolio would be to focus on a possible spin-off of the entire unit,” GE Chairman and Chief Executive Jeff Immelt said on Thursday.