GE sells its Homeland Protection business to Safran for $580 million
Following 9/11, GE acquired Ion Track (2002) for an undisclosed sum and InVision Technologies for $900 million (2004); the Homeland Protection unit had revenue of $260 million last year, which GE saw as disappointing; CEO of French company Safran: We want to become “a pivotal player in the security market”
General Electric (GE) has announced that it is to sell 81 percent of its Homeland Protection business to French aerospace and defense outfit Safran for $580 million, retaining just 19 percent for itself. The transaction has been approved by the boards of both companies and will be subject to customary regulatory approvals. Once the deal has been finalized, the Homeland Protection business will become part of the Defense Security division of Sagem Sécurité, a wholly owned subsidiary of Safran, and will be led by Jean-Paul Jainsky, the chairman and chief executive officer (CEO).
Dennis Cooke will continue as president and CEO for the Homeland Protection business and its headquarters will remain in Newark, California.
Jean-Paul Herteman, CEO of Safran, said: “Following our 2008 acquisitions of SDU-Identification [a Dutch manufacturer of secure passports and ID documents] and Motorola’s biometrics business [Printrak brand], adding GE’s Homeland Protection will significantly bolster our group’s business.”
Safran, which is based in Paris, France, will maintain GE Security’s Homeland Protection operations in the United States, Asia, Europe, the Middle East, and Africa. Homeland Protection provides equipment and services to protect airports, ports, borders, and critical infrastructures for government, military, and commercial customers. It produces tomography-based technology for the detection of hazardous or illicit substances in checked baggage, with the largest worldwide installed base of approximately 1,600 machines.
The business also provides services for its installed base, which generate approximately 60 percent of its total revenues.
GE Homeland Protection has approximately 780 employees, including 150 in research and development, located in the United States, Europe, and Asia. It posted sales of about $260 million in 2008.
Analysis
William Horobin and Scott Thurm write that for GE, the deal is largely an exit from a business it entered following the 9/11 attacks but which proved disappointing. The Homeland Protection business focuses on explosive and narcotics detection. GE entered the business with its 2002 acquisition of Ion Track Inc. for an undisclosed amount and the 2004 acquisition of InVision Technologies Inc. for $900 million. InVision made bomb-detection equipment used in airports and reported 2003 sales of $416 million. On Friday GE said the Homeland Protection unit had revenue of $260 million last year. The deal values the unit at $716 million, roughly 20 percent less than GE paid for InVision alone.
GE and Safran have worked together for more than thirty years, including a joint venture that produces the CFM commercial-jet engine. “This [acquisition] makes Safran a pivotal player in the security market,” said Herteman. He said he hoped to build the security business to 20 percent of Safran’s revenue within a decade, from 8 percent now.
GE said the 19 percent stake it will retain in the company would allow it to swap technology between the business and its health-care and research units.
GE also maintains the remainder of its security division, which offers alarm systems, access control and video and generates more than $1 billion in annual revenue.
You may recall that in 2007 GE agreed to sell 64 percent of the Homeland Protection unit to Smiths Group PLC as part of a deal in which GE acquired the British company’s aviation unit. The companies abandoned the security part of the deal later that year.
