Jan. 12 (Bloomberg) -- General Electric Co., the world's second-biggest company by market value, may be ``gearing up'' to make a large acquisition to sustain growth, Merrill Lynch & Co. analyst John Inch said.

The budget may extend to tens of billions of dollars as GE has little industrial debt and ``strong'' cash flow, Inch and colleague Elana Hordon Wood said in a note to investors.

Chief Executive Officer Jeffrey Immelt is seeking as much as $10 billion in the sale of a plastics unit, people with direct knowledge of the auction said. He's spent almost $70 billion on acquisitions since taking the helm at Fairfield, Connecticut- based GE in 2001.

``GE has the capital capacity to do something much larger if they choose,'' Inch said in an interview. ``Jeff Immelt, who is a very good strategic thinker, who's very technology savvy, would probably have a wider spectrum of consideration in terms of what GE may be interested in.''

Immelt has identified five areas he wants GE to pursue and they include health-care information technology, oil and gas, security and sensing, water treatment and Hispanic media. A purchase to bolster its industrial division may be the most beneficial as opposed to adding to GE Capital, Inch said.

Among the biggest European industrial companies is Zurich- based ABB Ltd., the world's largest builder of electricity networks, whose shares rose 2.1 percent today. The Swiss company has a market value equal to $38.4 billion.

``As a very profitable business, it would not be a surprise if ABB became a target for GE,'' said Andrew French, an equity salesman at E*Trade Securities Ltd. in London.

U.S. Attraction

Merrill Lynch said that the ``odds'' are that any potential acquisition may stand a better chance of being based in North America because of regulatory issues and the larger number of big companies to choose from.

Acquiring a large industrial company would help to more quickly reduce the weight financial services represent in the company's total profit and could increase GE's valuation, the note said.

The analysts aren't ruling out an acquisition in the technology industry either. Industries such as communications, computing and Internet-based businesses offer ``substantial global growth,'' Merrill Lynch said.

GE shares fell 3 cents to $37.89 at 4 p.m. in New York Stock Exchange composite trading. They gained 6.2 percent in 2006, better than the 4 percent drop in 2005 and still less than the 14 percent gain in the Standard & Poor's 500 Index.

Healthcare, Avionics

GE's biggest deals so far include the $10.3 billion purchase of biotechnology company Amersham Plc and the purchase of Vivendi Universal SA's media assets in 2004.

GE is the world's biggest maker of jet-engines and the top aircraft lessor. The company made a failed bid in 2000 for Honeywell International Inc. in part because of its cockpit electronics systems.

``It's reasonable to think they would be able to redeploy the potential sale of plastics into more strategic areas like healthcare and avionics,'' said Credit Suisse analyst Nicole Parent, who has an ``outperform'' rating on the stock. ``When you think about proceeds, we estimate they get $7 billion or $8 billion and they have the flexibility to do bigger than that.''

A large transaction may not come right away or be tied to a sale of plastics per-se, Inch said. A deal could be in the next several years, he said.

To contact the reporter on this story: Joao Lima in Madrid at jlima1@bloomberg.net

Last Updated: January 12, 2007 16:22 EST