Fairfield, Connecticut-GE is to sell its GE Advanced Materials (Silicones & Quartz) business to private investment group Apollo Management LP, in a deal valued at about $3800 million in cash and securities.
The deal includes GE's urethane additives business, made up of silicone surfactants, tertiary amine catalysts and non-silicone process additives. This business is based on the former OSi Specialities unit, which GE bought from Crompton Corp. (now Chemtura) in late 2003.
GE said it will retain a 10-percent stake in the new company and hold $400 million of notes. The transaction, subject to regulatory and other approvals, is expected to be finalised before the end of 2006.
"Today's announcement is another big step in repositioning the Industrial segment for faster growth and higher returns," said Lloyd Trotter, GE vice chairman and president and CEO of GE Industrial, in GE's 14 Sept announcement. "We negotiated an attractive price for the deal, and we will use the proceeds to fund growth and restructuring in our industrial businesses."
"Advanced Materials is a global leader in a wide range of high-technology materials solutions," according to Joshua Harris, a founding partner of Apollo, quoted in the GE statement. "It has a world class management team, a robust technology portfolio and strong research and development. This combination makes it an extremely valuable asset and gives Apollo a solid foundation to profitably grow this business and create long-term value."
GE Advanced Materials has annual sales of $2500 million in silicone-based products, including silanes, sealants, urethane additives and adhesives, as well as high-purity fused quartz and ceramics materials. The unit has its headquarters in Wilton and employs 5000 people in 38 locations worldwide.
The GE Advanced Materials business has two major joint ventures-GE Toshiba Silicones (GETOS), formed in 1971, and GE Bayer Silicones (GEBS), formed in 1998. GE has bought 100 percent control of these JVs from Toshiba and Bayer. Hence GETOS and GEBS will be included in Apollo's purchase.
GE net proceeds will be about $2000 million after the purchase of the minority partners' interest, taxes and expenses. The conglomerate said that the effect on operations will be modest and will be offset by restructuring.
Wayne Hewett, current head of GE Advanced Materials, will serve as president and chief executive officer of the new business, which GE said will be renamed.
Bayer said it will make Euro 475 million from selling its 49.9 percent interest in GEBS to GE. The transaction will improve Bayer's non-operating result by around Euro 250 million. GEBS was set up in 1998 to consolidate their two partners' silicone businesses and strengthen their competitive position. The operation employs 650 people in Germany, most of them at Leverkusen.