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General Electric has confirmed that it is to pay $3.3bn to Warren Buffett’s Berkshire Hathaway to buy back preference shares that Mr Buffett bought during the credit crisis in October 2008, the FT reports. Berkshire is being paid a 10 per cent premium on its original $3bn investment and has also been collecting a 10 per cent dividend. Berkshire Hathaway made the 2008 investment as part of a plan to shore up confidence in GE, following a sharp rise in the cost of insuring debt for GE Capital, the financial services arm, which represented about half the group at the time. GE was subsequently forced to cut its dividend and lost its triple A credit rating, as GE Capital suffered large losses. Its earnings have since rebounded, although it has been hit again over the past couple of months by turmoil in the financial markets.
– By John McDermott and Cardiff Garcia
The details of the US government’s attempted bank raid are coming in on Friday afternoon. Read more
General Electric, the US industrial conglomerate, will sell its sea container leasing joint venture to HNA Group, the Chinese travel and logistics company, and Bravia Capital, a private equity group, for about $2.5bn including debt. The FT reports HNA and Hong Kong-based Bravia trumped a number of US-based private equity and other companies to win the deal on Monday, highlighting the growing influence of Chinese capital in financing the infrastructure of global trade. The companies have ambitious plans to create a vertically integrated container business, and are looking into building or acquiring a container box-making unit. The sale of GE SeaCo, which is 50 per cent owned by GE’s finance arm, is also an important step for GE, which has pledged to expand its industrial portfolio and shrink its financial services unit. GE will receive about $500m and SeaCo, its partner, $528m.
Three-quarters of the companies that have so far reported second-quarter earnings have beaten estimates, but largely on account of international revenues rather than domestic profit, says the WSJ. General Electric, which saw overall revenues rise 21 per cent in the second quarter, experienced a 3.4 per cent drop in US earnings but benefited from double-digit growth in emerging markets. Corporate profits of this kind are unlikely to help the US jobs outlook any time soon. On the other hand, Apple and Coca-Cola have shown that it is possible to wring profit out of the US consumer, while Caterpillar, an emerging-markets stalwart, is now falling behind, Bloomberg notes.
Samsung Electronics is in talks to buy makers of MRI scanners and X-ray machines in an attempt to challenge General Electric and Siemens in medical equipment, Bloomberg says. Senior Vice President Jo Jae Moon, who leads a team of medical-equipment developers, said Samsung is in “contact” with some companies, without identifying which ones, and plans to spend 1,2oobn won ($1.1bn) in the medical- equipment business by 2020, as part of wider plans to build the medical-equipment division into one that generates 10,000bn won in annual sales.
General Electric and Capital One have submitted rival bids for the Dutch lender ING’s US online banking operations, in a sale that could fetch up to $9bn, Bloomberg reports. GE made an all-cash offer but Capital One has offered some stock for the deposit-rich bank, sources said. ING’s willingness to accept shares is however unclear. The bank’s mortgage assets are less attractive and GE is aiming to offload them to a partner in its bid. Ally Financial and CIT Group are also potential buyers for ING Direct USA, but talks have either ended or are on hold. ING needs a quick sale to repay its 2009 Dutch government bailout, Reuters adds.
Here’s a nice piece of research from Barclays Capital.
The UK bank has enlisted the help of a former nuclear safety employee to discuss events at Fukushima Daiichi, the Japanese nuclear plant hovering on the edge of meltdown. For what it’s worth, BarCap’s energy team doesn’t think there was an operator error at the plant — the force of the earthquake combined with the effect of the tsunami “simply exceeded what the plant was designed to withstand.” Read more
Jeff Immelt, the long-standing CEO of General Electric, has been given a stock award that will encourage him to stay with the company for another five years, the FT says. Immelt, who has taken his first bonus since the financial crisis, has been given a $7.4m award of stock options that will vest fully in five years, giving him a strong incentive to stick with the company into the second half of the decade. Reuters adds that GE shares trade at about half what they were worth before Immelt took the reins of GE in 2001.
General Electric and a joint venture partner are looking to sell their GE SeaCo container-leasing business for about $2.5bn, as the conglomerate continues to reshuffle its portfolio and the pair try to capitalise on the hot market for companies in the sector, the FT reports. The container leasing industry has boomed during the past year. Manufacturers in China stopped producing during the downturn, creating a shortage in 2010 when the economy recovered and trade picked up. GE SeaCo, which is 50 per cent owned by GE Capital, has the fifth-largest container fleet in the industry. Tal International and Textainer, the sector’s two biggest public companies, have rushed to buy up containers as cargo volumes rebound.
General Electric will pay $2.8bn for the well-support division of John Wood Group, the UK oil services company, continuing its drive to expand in the energy industry by acquisition, the FT says. The deal is the fourth acquisition for GE’s energy business in recent months, taking its total spending to $7.5bn, as the group seeks to reduce its dependence on its financial arm, GE Capital, and strengthen its position in industrial and infrastructure markets. “Five years ago, our revenues from oil and gas drilling and production equipment were zero. Now, out of nowhere, we are a force to be reckoned with,” said John Krenicki, chief executive of GE’s energy business.
US energy services company John Wood Group has put its well support division on the block and has hired Credit Suisse to advise on the sale, reports Reuters, citing sources close to the matter. First-round bids were due on Wednesday for the unit, with valuations expected to range from $1bn to more than $2bn. Wood Group’s market cap as of Wednesday was about $4.9bn. The company has not yet released full year results, but the well support division accounted for more than a third of its pretax earnings in the 2010 first half. Possible bidders could include General Electric, Halliburton, Weatherford International, Cameron International and FMC Technologies, the report adds.
US and Chinese officials touted a $45bn package of export deals on Wednesday to coincide with the state visit of Hu Jintao, the Chinese president, but the largest contract was in fact a reiteration of a previously announced order, notes the FT. US companies have been critical of China in the past 12 months, pressing the administration of Barack Obama to toughen defence of their intellectual property rights and their ability to access lucrative Chinese government procurement contracts. To smooth the waters, the Chinese president met the chief executives of high- profile US companies on Wednesday such as Jeff Immelt of General Electric, Steve Ballmer of Microsoft and Lloyd Blankfein of Goldman Sachs. The export package includes a $19bn order for Boeing aircraft, 70 extra contracts involving 12 US states worth $25bn and a series of investment deals. Combined, the deals will support about 235,000 US jobs, the White House said.
US regulators will approve Comcast’s purchase of NBC Universal from General Electric and Vivendi as early as Tuesday, people close to the review process say. The FT reports that the Federal Communications Commission has been working over final conditions for the deal since December, when chairman Julius Genachowski circulated a draft order for the approval to the FCC’s other four commissioners. Since then the commissioners have been hearing last-minute appeals from lobbyists and public interest groups who have emphasised the need for strict conditions that will prevent Comcast from exploiting its control of both content and distribution to harm competitors. Even if regulators approve the deal this week, the Wall Street Journal reports it is unlikely the transaction will close before the end of the month on account of its mechanics.
The US is going to match Chinese terms with cut-price export financing for the first time to help General Electric win an order for 150 diesel-electric locomotives from Pakistan, the FT says. With Hu Jintao, China’s president, due in Washington next week, the move suggests Barack Obama, US president, will continue to push China to follow global standards on trade. Dow Jones reports that China’s ambassador to the US said s higher yuan can’t fully resolve the US trade deficit, but that Chinese and US businesses have the potential to cooperate on some high-speed rail projects within the States.
General Electric has agreed to buy Wellstream, the UK-based oil and gas services group, for approximately $1.3bn, marking another step in an aggressive expansion into energy services, the FT reports. Monday’s deal ends months of pursuit in which Wellstream twice rebuffed GE offers, including a $1.19bn bid made in October. Wellstream has manufacturing bases in the UK and Brazil and is one of the world’s largest suppliers of flexible pipes for the oil and gas sector. One of its main attractions to potential bidders is its exposure to Brazil, which is investing heavily in exploration. The acquisition will also move forward GE chief executive Jeff Immelt’s strategy to focus on the company’s energy unit as a profit driver, and follows GE’s buying of oil-field specialist Dresser earlier in the year, Bloomberg says.
General Electric is set to seal a £755m-plus takeover of Wellstream, the UK oil and gas services group, as part of its aggressive expansion into energy services, reports the FT. The deal could be announced as early as Monday. Wellstream has twice rebuffed the US conglomerate, but the two sides have now agreed a price. Wellstream’s board had rejected as too low GE’s previous offer, in October, of 750p, valuing Wellstream at £755m. GE’s third offer is understood to be substantially higher than 750p a share but less than 800p. The deal will end months of pursuit by GE of Wellstream which announced in September it had received several bid approaches. National Oilwell Varco was among GE’s rival suitors and, says the Telegraph, may still try to trump GE’s offer..
General Electric has replaced the head of its global operations as it seeks to improve performance in emerging markets, reports the FT. John Rice, vice-chairman and tipped as a future chief executive, will move to Hong Kong to lead GE’s operations outside the US, with a focus on markets such as China, India and Brazil. He takes over from Nani Beccalli, who has been head of GE International since January 2005 and is based in Brussels. Mr Beccalli will continue to focus on countries such as Germany, Japan and South Korea and will report to Mr Rice. Reuters reports that Jeffrey Immelt, chief executive, said that GE is set to invest more than $2bn in China, focusing on R&D as well as technology and financial services joint ventures.
General Electric, the company that was a pioneer of the electric light bulb, has warned that the industry is facing “dramatic change” that threatens the position of long-established market leaders as energy efficiency standards drive the adoption of new technologies, the FT reports. The traditional incandescent light bulb is set to be phased out in the US, starting in California at the beginning of 2011, following similar moves in the European Union and Australia. GE, formed in 1892, was built on Thomas Edison’s incandescent bulb as one of its principal products. Today, its lighting business has annual revenues of about $3bn and employs 17,000 people. GE on Friday reports third-quarter results, with analysts on average expecting a 16 per cent rise in net income compared with the equivalent period of 2009 to $2.5bn, on unchanged sales of $37.4bn.
General Electric has struck a $3bn deal to buy Dresser, a Texas-based maker of gas engines used to power oil and natural gas production, marking its first big acquisition since the global financial crisis began, the FT reports. The deal came after GE confirmed it had made a £755m ($1.2bn) offer for Wellstream, a UK maker of flexible pipeline products for oil and gas companies, but had been rebuffed. Reuters says the Dresser deal is the latest sign that corporate America, which is sitting on huge cash reserves, is growing more willing to spend money on takeover deals.
- General Electric will buy Texas-based energy services company Dresser for $3bn, Reuters reports, even as elsewhere in the sector GE finds itself rebuffed by the UK company Wellstream. GE’s bid to build up its energy business comes in response to large Asian orders, including a joint venture to expand China’s wind power market, reports the FT.
- Four Japanese and US air carriers have won US federal immunity from antitrust prosecution as they build an alliance on America-Asia routes, Bloomberg reports. Japan Airlines and All Nippon Airways will benefit from an ‘open skies’ agreement forged between the US and Japan late last year.
- Johnson & Johnson has agreed terms with Crucell on its bid to buy up the Dutch biotech company, Reuters reports. J&J had previously built up a 17.9 per cent stake in the firm, which manufactures vaccines and antibodies. The agreement comes despite some major Crucell shareholders fearing that the offer’s price is too low, the WSJ adds.
- General Electric has had a $1.2bn offer for UK oil services company Wellstream rebuffed, says Reuters. GE’s offer price came in some way under the current value of Wellstream’s shares. The company added that it was ‘disciplined in its acquisitions’ and that further action was uncertain.
Emirates, the Dubai-based airline, on Monday announced a $9bn order for 30 Boeing 777 passenger jets, making it the biggest deal so far at the UK’s Farnborough air show, reports the FT. The agreement follows an $11bn order for 32 Airbus A380 superjumbos by Emirates at the Berlin air show last month. According to the Telegraph, that brings Boeing’s tally for the airshow to 70 orders so far, still far behind Airbus’s 122 orders, which is already close to the airline’s 130 target for the week. In leasings, Bloomberg reports General Electric’s GECAS has ordered 40 Boeing 737-800s and 60 Airbus A320s, in deals collectively valued at $8bn.
Jeffrey Immelt, GE’s chief executive, launched a rare broadside against the Chinese government, which he accused of being increasingly hostile to foreign multinationals, the FT reported. “I really worry about China,” Mr Immelt told an audience of top Italian executives in Rome, accusing the Chinese government of becoming increasingly protectionist. “I am not sure that in the end they want any of us to win, or any of us to be successful.” GE later moved to distance itself from his remarks.
Largely untested Islamic finance structures have, as we all know, been drawing unwanted scrutiny due to Dubai World’s recent debt-standstill antics.
However, that hasn’t stopped western corporates from adopting Islamic debt structures in a bid to raise much needed financing from alternative non-Western sources. Read more