1Financial Times

1.1GE looks to sell off appliances unit

By Francesco Guerrera and Julie MacIntosh in New York Published: May 16 2008 03:00 | Last updated: May 16 2008 03:00General Electric is considering putting its appliances unit up for sale in a move that could raise some $7bn and sever its century-longlinks with one of its oldest businesses.People close to the situation said the US conglomerate had held talks with investment banks with a view to hiring one of them tosolicit bids for the business, which had sales of $7.2bn last year. However, people familiar with the situation said no final decision onwhether to sell the appliances business, which has been part of GE since the early 1900s, had been made.The decision to consider a sale of the appliances unit, whose products range from toasters to ovens and fridges, underlines the desire by Jeffrey Immelt, chairman and chief executive, to boost earnings by investing in high-margin businesses.Mr Immelt is under pressure to improve GE's results after the company shocked the market with first-quarter results that were well below analysts' expectations last month. Its shares have lost more than 15 per cent since early April.The appliances division, which pioneered the electric toaster in 1905, has been plagued by low margins and slim profitability and haslong been seen as a candidate for disposal.But Mr Immelt had repeatedly maintained that the division was valuable to the locomotives-to-medical systems conglomerate becauseit is a well-known consumer brand.GE officials had also said the unit, which has its headquarters in Kentucky, generated a healthy cash flow that could be invested inhigher-growth businesses.

But after the profit miss in the first quarter, Mr Immelt needs to improve earnings and margins to meet his long-term target of 10 per cent annual earnings growth and allay investors' fears over the company's strategy.People close to the situation said Goldman Sachs was the frontrunner to handle the auction if GE decided to go ahead with the sale.Goldman declined to comment. Analysts said potential buyers could include Chinese, South Korean and Indian companies eager to buy a well-known brand, such as GE and Hotpoint, and acquire a large distribution system in the US and other countries.Private equity groups could also be interested as the business has a strong cash flow and could be reorganised by reducing the number of product lines and moving manufacturing facilities to low-cost countries.GE could structure a deal allowing it to keep some of the rights to the brands, some analysts said.

1.2General Electric

Published: May 15 2008 00:23 | Last updated: May 15 2008 20:47If you can’t stand the heat, sell off what’s in the kitchen.

General Electric

, having watched its shares dive after some shocking first-quarter results, plans to ditch its fridges and toasters to regain some momentum.Jeffrey Immelt, the chief executive, evidently hopes to make a splash with shareholders. Certainly, the decision to auction GE’sappliances business is heavy with symbolism. Doing so will close the book on more than a century of history, taking GE out of a business that represents its brand’s most direct contact with individual consumers. You can almost hear the sound of sacred cows beingslaughtered.

1.2.1EDITOR’S CHOICE

1.2.1.1GE seeks buyer for rail services unit- May-031.2.1.2GE property arm buys €1.3bn loan portfolio- Apr-241.2.1.3GE steps up plans to trim amid slowdown- Apr-231.2.1.4Francesco Guerrera: Kick-ass advice for protégés- Apr-181.2.1.5Editorial Comment: Quarterly guidance misses the mark- Apr-171.2.1.6Welch plays down Immelt jibes- Apr-18

In terms of financial impact, however, the sale is unlikely to make a huge difference. The appliance business has sales of $7.2bn,accounting for about 4 per cent of GE’s total. Given low margins, it is even less important for profits.What the disposal would do is remove a drag on top-line growth – appliance volumes fell 18 per cent in the first quarter amidconsumer weakness and falling residential construction. Margins will also benefit. That should help GE somewhat in its attempts toachieve 10 per cent earnings growth.The trouble is that such disposal benefits could be largely cosmetic. In terms of real value for shareholders, it is hard to see GE gettinga good price for the business while it is struggling in such a tough market – squeezed by weak demand and high raw materials costs.What is more, private equity, a likely source of enthusiastic competition for such an asset a year ago, now looks out of contention.The best hope is probably for an ambitious overseas rival to buy the business for its powerful brand and market position – just as IBMoffloaded its once-core PC business to Chinese upstart Lenovo in 2004.