GE Sees Oil, Software M&A Opportunities as Boston Move Nearsby
Finance chief says there's `opportunity to create real value'
City's ecosystem has same focus as GE, Bornstein says
General Electric Co. is hunting for acquisitions in the beleaguered oil and gas industry after missing an opportunity to buy assets when the merger between Halliburton Co. and Baker Hughes Inc. was scuttled.
GE had been in talks for businesses the two companies were preparing to sell if the combination went through, Chief Financial Officer Jeff Bornstein said in a Bloomberg Radio interview with Tom Moroney and Anne Mostue. After resistance from antitrust authorities forced Halliburton and Baker Hughes to walk away, GE is looking for other deals “at valuations that make sense,” Bornstein said.
“Virtually anything you do, you’re going to be very, very happy with” in three to five years, Bornstein said on the “Baystate Business Hour” program. “So to the extent that there are opportunities to fill out our portfolio, fill in product and service gaps, I think there’s an opportunity to create real value.”
Any deal would advance a dramatic transformation GE is undergoing as it prepares to relocate to Boston later this year. The company has agreed to sell its home-appliances business and more than $160 billion in finance assets in just over a year to renew focus on industries such as energy and aviation. GE aims to be a more streamlined and technologically advanced industrial manufacturer by the time it moves to temporary offices in August.
GE rose 1 percent to $30.18 at 2:02 p.m. Friday in New York. The shares fell 4 percent this year through Thursday.
Besides oil and gas deals, GE will also explore opportunities to work with or acquire startups in the Boston area, particularly ones that complement GE’s growing software business, Bornstein said. Executives have said they want to build a $15 billion digital business in the coming years.
“There have been a number of technology and startup companies that have reached out to us since we’ve made the announcement publicly, in everything from robotics to health sciences, 3-D printing, advanced manufacturing,” he said. “There are capabilities that we’re building organically, and there will be capabilities, applications, use cases that we’ll supplement with partners.”
Boston’s network of technology companies, research universities and skilled workers were central to GE’s decision in January to move there from its longtime home of Fairfield, Connecticut. The company plans to play up the tech industry angle with the new permanent office, slated to open in two years, with features such as a “software foundry to develop applications,” Bornstein said.
“We like the idea of being able to walk out the door and interact with an ecosystem that is very much focused on the same things we’re trying to focus on,” said Bornstein, who earned a degree from the city’s Northeastern University and plans to move to Boston this year. In Fairfield, he said, when you walk out the door “you see turkey and deer.”
The lure of Boston led GE to turn down more-lucrative incentive packages offered by other cities, Bornstein said. While he wouldn’t specify locations, some cities offered twice the package from Boston and Massachusetts, which included about $150 million in tax relief, grants and other programs. The ultimate package GE accepts will be less, Bornstein said, in part because the company plans to pay some costs itself.
As GE refashions its business to be more like a tech company, it’s shedding the bulk of the GE Capital lending arm that imperiled the parent company during the financial crisis. In the latest move, GE this week raised $749 million selling shares in an initial public offering of its Czech banking unit.
GE submitted an application to U.S. financial regulators in March to rescind its designation as a too-big-to-fail institution. Dropping from the ranks of systemically important companies would free up billions of dollars of capital and help GE avoid increasingly restrictive oversight in the coming years.
Bornstein said he’s “hopeful” GE will get a positive response from regulators by August.
“The reason we filed for de-designation is we no longer in any way, shape or form represent a systemic risk to the financial system in the U.S.,” he said. As for the odds that GE will escape the label before the Boston move? “I like to think better than 50-50, but I know nothing.”