NEW YORK, NY — General Electric Co. (GE) has agreed to acquire Honeywell Inter-national Inc. for $42 billion in stock, it was announced Oct. 23. The announcement capped a whirlwind weekend of talks, which ended quite differently than they began.

Going into the weekend of Oct. 20, it appeared that United Technologies Corp. (UTC) was the lone company seeking to acquire Honeywell. Media reports and Honeywell’s website stated that the two companies were “in discussions regarding a possible business combination.”

“General Electric came in on Friday with a better offer [than UTC],” said Rick Batyko, spokesperson for Honeywell. “Both boards approved the plan on Saturday.”

John F. Welch Jr., GE chairman, was “standing in the pit at the [New York] stock exchange on Thursday night” when he heard that Honeywell had just been acquired by UTC, which was not true.

But when Welch and his team, who had been looking at the possibility of acquiring Honeywell, went to work and made their pitch to Honeywell, the stage was set for an interesting turnaround. When UTC was informed by Honeywell of its intention to seek another buyer, UTC backed out of the deal late Friday.

GE will pay 1.055 of its shares for each of Honeywell’s 801 million outstanding shares. At the close of the bell on Monday, Oct. 23, the news of the merger had opposite effects on each company’s stock. Honeywell’s stock rose almost three points, while GE’s stock dropped a little more than three points. This brought the value of the deal down from the initial proposal of $45 billion to approximately $42 billion.

Overseeing the Merger

One of the clinchers to making the deal was Welch’s postponement of his retirement from GE, originally scheduled for April 2001. He will now stay on until the end of 2001 to oversee the merger of the two high-tech companies. Welch said the deal was too good to pass up.

“This is a high-tech company. GE is a high tech company,” said Welch. “We’re merging two real high-tech companies, with real earnings that do real things.”

Mike Bonsignore, Honeywell ceo, added, “We’ve got automation on both sides of our company that will bode well for our industrial businesses [and] for our home and buildings businesses.”

“The companies fit together nicely,” said Batyko. “They bring different projects to the markets. It was the best deal for stockholders.”

Under terms of the deal, expected to be completed in early 2001, GE will also assume an unspecified amount of Honeywell debt. Honeywell’s corporate headquarters in Morristown, NJ, will be closed as part of the deal and about 550 employees there may lose their jobs, according to Honeywell spokesperson Tom Crane.

But that won’t stop Welch, a high-profile chairman, from beaming about the new challenge in front of him.

“As we look at the three hundred and forty thousand employees of GE, and the one hundred and twenty thousand employees of Honeywell, our challenge is to pick the best and brightest — which is what we’ve always done.

“We’re going to make this company the greatest company in the world.”

Publication date: 10/30/2000