Tags: Morgan | Stanley | GE | Takeover

Morgan Stanley: GE's Takeover Strategy Pivotal in 2014

Friday, 13 Dec 2013 04:26 PM

 

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General Electric Co. investors are looking for signs that the world’s largest maker of jet engines and medical scanners will embrace a more aggressive approach to acquisitions in 2014, according to Morgan Stanley.

Chief Executive Officer Jeffrey Immelt may earmark more money for deals next year as he makes progress toward his goal of shrinking GE’s finance unit, Nigel Coe, a Morgan Stanley analyst, said Friday in a note to clients. Immelt said in 2012 his focus was on “bolt-on” purchases of $4 billion or less.

GE’s mergers-and-acquisitions plans will be the most important topic at its annual winter meeting with shareholders and analysts next week, Coe said. A faster M&A pace would signal Immelt’s interest in replacing profit from GE Capital’s consumer credit business, set for an initial public offering next year, by bulking up manufacturing.

“The key question is whether GE will signal a shift up in M&A spend at its annual outlook meeting next week,” wrote Coe, who is baed in New York and has an equal-weigh rating on the shares. “We believe capital allocation in 2014 is a key debate for the stock.”

Seth Martin, a spokesman for Fairfield, Connecticut-based GE, said he couldn’t immediately comment on Coe’s note.

GE raised its quarterly dividend by 16 percent to 22 cents a share Friday, payable on Jan. 27. The stock rose 1.1 percent to end at $26.84 in New York. The shares advanced 26 percent through Thursday, compared with a 24 percent gain for the Standard & Poor’s 500 Index.

Coe projected that share repurchases may fall by 50 percent or more in 2014 from the $10 billion annual pace GE forecast for this year. That would leave more cash for M&A, he said.

In April, GE agreed to purchase Lufkin Industries Inc., a maker of oilfield machinery, for $3.3 billion to bolster its rapidly growing oil and gas division. In December 2012, it agreed to acquire Avio SpA’s aviation business for $4.3 billion, gaining control of a supplier of jet-engine components to its aviation unit.

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