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GE Sells Assets to Raise Capital for Takeovers

General Electric CompanyGeneral Electric Co. is on the verge of getting a lot of money for acquisitions.

The locomotive and jet engine manufacturer, which is currently worth $274 billion, is about to sell some of its private-equity lending assets in the US for $12 billion after selling Japanese Commercial Finance Business. However, this is just the tip of the iceberg as the company, under the leadership of Jeffrey Immelt, its chief executive officer, is planning to sell assets worth $200 billion.

Westwood Holdings Group Inc. Vice President Scott Lawson said:

I have a hard time believing that he’s not going to continue along the path of making acquisition. GE is pretty big so you’ve got to do big moves to move the needle.

Westwood Holdings is the overseer of around $22 billion, which includes GE stock.

Joel Levington and Karen Ubelhart of Bloomberg Intelligence are of the opinion that, once its diverts its cash to re-purchasing dividends and shares, the company will have around $40 billion for acquisitions. Although the company will not use all its resources at one go, it could takeover companies such as Bio-Rad Laboratories Inc., a manufacturer of life-science equipment worth $4.3 billion, and Flowserve Corp., a manufacturer of valves and industrial pumps worth $7.3 billion. GE could also attempt to acquire assets belonging to Halliburton Co. and Baker Hughes Inc.

It is worth remembering Immelt’s statements at an industry conference held at Longboat Key in Florida on May 20. He had said:

We are going to do some acquisitions as time goes on. These are going to be core bolt-on deals, good returns, mixture of growth and cost and take it from there.

During the industry conference, Immelt said that, at the end of this month, the company could announce as much as $30 billion in sale of financial assets. Most of this money will be used in re-purchases.

Karen Ubelhart said:

They’re going to have a mature capital-goods company at the end of all of this.” Further stating that acquisitions are capable of fostering organic growth, she said that the company “could do quite a big deal” as they would be “pretty comfortable with $5 billion to $10 billion.

Irrespective of what company or asset GE might acquire in the near future, takeovers are an important step in the company’s transformation. Deane Dray, an analyst at the Royal Bank of Canada says that, although the company is involved in many other initiatives at present, they will soon be hunting for new deals.

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