CHARLOTTE, N.C. (AP) -- General Electric Co. will buy SPX Corp.'s Edwards Systems Technology fire-and-security unit for nearly $1.4 billion in cash, both companies said Monday.
The sale, which is subject to regulatory approvals, is expected to close in the first quarter of 2005.
"GE Infrastructure is rapidly becoming the premier security provider and acquiring Edwards positions us as a leader in the $5 billion fire detection and life safety segment,'' Bill Woodburn, president and chief executive of GE Infrastructure, said in a statement.
The acquisition is GE's latest move into the security market, one of several growth areas the company is targeting in an effort to return to double digit profit growth next year. In March, GE agreed to acquire InVision Technologies Inc., which makes devices to detect explosives as well as other security systems, for about $900 million.
The latest acquisition will enable GE to expand into a larger $10 billion building security market, company officials said. GE had already been making security devices such as access control and cameras.
"It's a significant step toward achieving our vision of being a premier, full spectrum security provider,'' said Jay Pinkert, a GE security spokesman.
In afternoon trading on the New York Stock Exchange, SPX shares were up $1.81, or 4.2 percent, at $44.80 while GE shares were down 17 cents at $36.08.
GE expects cost savings from the deal, but said it's too soon to predict whether there will be layoffs. The acquisition is expected to result in about $30 million in cost savings and boost profits next year by about a half cent per share, according to GE and Nicholas Heymann, an analyst at Prudential Securities.
"We see significant revenue and cost synergies with this combination, and expect the acquisition to be accretive to GE's 2005 earnings,'' said Woodburn.
Fire detection systems are the only security devices that are required as part of the building specification in new construction projects, GE officials said, meaning such systems play a central role in the design and specification of overall security systems.
"Since Edwards' technologies can be installed using a building's existing fire system wiring, there is a significant opportunity for GE Infrastructure to serve the important retrofit segment,'' said Ken Boyda, president of GE Infrastructure's security business.
John Blystone, chairman, president and chief executive of Charlotte-based SPX, said the sale "exemplifies our disciplined approach to unlocking value for SPX shareholders.''
"This transaction will yield significant after-tax proceeds for SPX that we will use to further strengthen our balance sheet,'' he said.
EST, which develops fire detection and other building security systems was acquired by SPX in 1998 as part of its acquisition of General Signal.
Blystone said SPX will use the proceeds from the sale to pay down debt and buy back equity. As a result of the sale of EST and other transactions, SPX is withdrawing its earnings guidance for 2004, he said.
SPX provides technical products and systems, industrial products and services, flow technology and cooling technologies and services.