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GE’s $16.7 Billion NBC Windfall Boosts M&A Flexibility

General Electric Co.’s $16.7 billion payday from the sale of its stake in NBC Universal gives Chief Executive Officer Jeffrey Immelt more room to make acquisitions as he focuses on industrial growth.

GE is already using much of the proceeds from the sale to buy back its stock, boosting repurchases this year to $10 billion. The Fairfield, Connecticut-based company said in a statement yesterday that its board voted to increase the size of a share repurchase plan to $35 billion, with $23 billion of room for further buybacks remaining.

Immelt is balancing shareholder rewards and acquisitions such as the $4.3 billion purchase of Italian manufacturer Avio SpA’s aerospace-parts business with a cost-cutting program to boost margins at GE units including energy and health care. GE will likely avoid huge acquisitions in favor of lower-risk “bolt-on” deals, he said on a conference call today.

“We obviously have the flexibility to do more M&A, or maybe even more buybacks, depending upon the opportunities we see out there,” Chief Financial Officer Keith Sherin said.

Selling its stake in NBC Universal will likely give GE $10 billion to $13 billion to spend on acquisitions, after subtracting cash committed to buybacks, dividends, capital expenditures and debt retirement, Steven Winoker, an analyst at Sanford C. Bernstein & Co., wrote in a note to clients before the call. He has a market perform rating on GE stock.

GE climbed 3.6 percent to $23.39 today in New York, the highest closing price since October 2008.

Entertainment Unit

The manufacturer owned NBC from its acquisition of RCA Corp. for more than $6 billion in 1986 until December 2009, when it agreed to sell a 51 percent stake in the unit to Comcast for $9.8 billion in cash. During that stretch, Immelt expanded GE’s media holdings with the 2003 addition of Vivendi Universal SA’s U.S. media assets and built the unit into his highest-margin business.

Money raised from the initial sale helped fund GE’s six- month, $11 billion acquisition spree that ended in 2011 and saw the company bolster its energy division with purchases including Dresser Inc. and the well-support division of John Wood Group Plc.

GE’s takeover strategy has since turned to building a mining business within its transportation unit and consolidating its aviation supply chain by buying companies that make components used in its jet engines. The Avio deal, announced in December, followed agreements to purchase Australian mining- equipment manufacturer Industrea Ltd. and U.S.-based Fairchild International Inc.

Real Estate

In addition to agreeing to buy the 49 percent of NBC Universal it didn’t already own, Comcast will acquire property at 30 Rockefeller Center in New York and Englewood Cliffs, New Jersey, for an additional $1.4 billion, GE said. The company will receive $12 billion in cash, $4 billion in Comcast- guaranteed debt and $700 million of preferred stock.

The deal will generate a $1 billion pretax gain for GE, which it will use to pay for restructuring, GE said in yesterday’s statement. Its GE Capital unit will receive an additional $900 million that will be used to cover losses on sales of real estate holdings.

To contact the reporter on this story: Tim Catts in New York at tcatts1@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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