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GE M&A Strategy Seen as Key 2014 Issue by Morgan Stanley

GE CEO Jeffrey Immelt
General Electric Co. Chief Executive Officer Jeffrey Immelt. Photographer: Joshua Roberts/Bloomberg

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 today 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 on Dec. 18, 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 based in New York and rates the stock as equal-weight. “Capital allocation in 2014 is a key debate for the stock.”

Seth Martin, a spokesman for Fairfield, Connecticut-based GE, declined to comment on Coe’s report.

GE raised its quarterly dividend by 16 percent to 22 cents a share today, payable on Jan. 27. The stock rose 1.1 percent to $26.84 at the close in New York. The shares have gained 28 percent this year, compared with a 24 percent advance 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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