It's official: UTC to acquire GE Security

UTC pays $1.82 billion


GE Security is being sold to United Technologies Corporation (UTC) for $1.82 billion, the two companies announced today. The deal includes the purchase of eight manufacturing facilities and the efforts of approximately 4,700 employees, who produce and represent a variety of security products, from the Simon alarm panels to TruVision cameras, and a mix of software-based security management systems like the Topaz and Facility Commander solutions. The deal also includes GE Security's fire alarm systems business, which stemmed heavily from GE's acquisition of Edwards Systems Technology (EST).

The sale price of $1.82 billion is little more than what the company paid for the Edwards fire business five years ago, when it spent $1.4 billion to bulk up its fire business. Earlier this year, in April 2009, GE sold a portion of its security business off to French company SAFRAN for $580 million. In that deal, GE relinquished 81 percent of its ownership of that "homeland protection" business unit, which was a sub-category within GE Security. GE Security also sold its Edwards Service unit to Atlanta, Ga., contracting company Carter Brothers in March 2007. That unit was the service division of EST; it included 10 branch operations and 150
Employees.

Much of GE Security was the result of acquisitions. Besides the purchase of Edwards Systems Technology in 2004, the company bought then-defunct high-definition video surveillance firm CoVi (Feb. 2008), access control company Casi-Rusco/Interlogix (2002), networked/IP video company VisioWave (June 2005), and digital and fiber optic data signal transmission systems International Fiber Systems/IFS (April 2003).

UTC itself has made significant acquisitions to move its business into the security space. It purchased Lenel Systems in March 2005, bringing aboard one of the world's leaders in access control systems marketshare (the Casi-Rusco systems which GE owns are generally thought to be strong competitors to Lenel's solutions). On the fire systems side, UTC Fire & Security owns the Chubb, Kidde and Marioff brands, as well as fire and security systems integration arm Red Hawk, which UTC purchased in September 2006. Marioff was acquired in September 2007; Kidde was acquired in April 2005; Chubb was acquired in 2003; Initial Electronic Security Group was acquired Match 2007. UTC Fire & Security also includes the Onity access control business (formerly TESA Entry Systems before the UTC acquisition).

UTC's President and CEO Louis Chenevert said the move "strengthens our North America footprint, extends our capabilities and complements our existing fire and security businesses." Chenevert said the acquisition was expected to be "earnings neutral" in 2010 due to the costs restructuring and the transaction itself, but would be profitable for UTC starting in 2011.

The acquisition received positive billing from industry consultancy firm Frost & Sullivan, whose physical security group analyst Matia Grossi called the move a "giant leap."

"UTC had already made a few acquisitions in the security market which gave the company great integration capabilities and a dominant position in the fire detection space; with the acquisitions of companies such as Chubb, Red Hawk, Kidde and Lenel," said Grossi. "However, the company needed to gain access to a full product portfolio and GE Security is providing that to UTC. With this acquisition, UTC has made a giant leap in the attempt to widen its capabilities and fulfill the need of offering its client a real 'one-stop-solution'."

GE Security has operations in 26 countries. The acquisition still awaits standard regulatory approval.