Could GE/Current’s Success Drive Acquisition Price Lower?

EdisonReport has been tracking the sale process of GE Lighting and Current, Powered by GE.   Here is what we have learned so far:

  • About 50 companies have expressed initial interest. Visits and meetings with key potential suitors will occur in the second quarter.   GE plans to receive bids during the third quarter.
  • Three businesses are for sale in one package: GE Lighting, Current, Powered by GE, and Daintree. However the sell sheet makes distinctions between GE Lighting and Current, leading us to believe that GE would also sell the businesses individually.
  • The plan is to complete the transaction in the fourth quarter and GE is committed to holding that time frame.
  • GE wants $1.0B for the combined deal, but we hear chatter that the price should be in the $400M to $600M range. We were further told that the enterprise may have been worth the $1.0B tag in years past, but not today.
  • Selling the EU side of the business in mid-February to a company led by Joerg Bauer, a former GE Lighting executive, was a great move, and that deal has closed or is about to close. Offloading the Hungary facility makes the U.S. deal simpler and more viable.
  • Recently your humble editor was able to review a portion of the teaser sheet, which is really a PPT. According to the teaser, the GE Lighting side of the business focuses on how they have simplified the manufacturing footprint from 44 plants to 2 plants and how GE is the number one consumer brand. It also talks about the strong relationship at Lowes.
  • Regarding the Current portion of the teaser, GE touts their Smart Cities plans, and specifically their success in San Diego as the ‘world-wide biggest IoT deployment.’ This may actually hurt their sale. More about that later. They also list major customers such as Wal-Mart, JP Morgan Chase, Curtis Stout (interesting that they list a rep), Graybar, Lowe’s, Grainger and WESCO.
  • The teaser sheet is extremely well done and convincing. It does a great job of highlighting all that has made GE great over the years.
  • One thing that gave us pause was a claim of how much GE had invested in Lighting. We have heard of different investment numbers. One source tells us GE claims to have recently invested $1.0B in Lighting and a second source insists the number is $2.0B. Regardless, both numbers seem high.

On 5 MAR, EdisonReport linked to a Reuter’s Hong Kong story, which stated Chinese companies MLS and Fosham were putting together separate bid packages. The following day, MLS publicly denied they were interested. EdisonReport recently published that MLS bought out their partners and now owns 100% of LEDVANCE. We don’t see one company owning both GE Lighting and what used to be SYLVANIA.

Fosham, which does a lot of private label business in the U.S., has been highly subsidized by the Chinese government.   While the EdisonReport works hard to stay clear of politics, the GE/Current sale may be highly political. Given Current’s success with Smart Cities and IoT, I can just imagine the tweet from President Trump, “GE, a company that is as American as apple pie, wants to sell to the Chinese and then the Chinese Gov’t will control our cities!!!” Two of my sources are very concerned that the Trump administration will not allow a Chinese company to purchase GE.

EdisonReport has learned of another Chinese potential suitor and that is Sonny Wu, of GSR Ventures. Mr. Wu is known in our industry for his efforts to acquire LumiLEDs from Philips—that transaction was blocked because of concern over the transfer of technology. At that time, Mr. Wu stated, “Moving forward, we are not deterred from our goal of building the world’s leading LED lighting company; and China will inevitably become the leader of the global LED industry because of its industrial ecosystem and competitive advantages in scale and cost,”

Last, we spoke to a European company who has also expressed an interest in acquiring GE. That company also told me they were comparing it to another American lighting company that is being floated.