GE unloads water unit to smooth oil merger

NEW YORK/PARIS: General Electric Co agreed on Wednesday to sell its water unit in a €3.2 billion ($3.4 billion) deal, putting the industrial giant a step closer to the planned merger of its oil division with Baker Hughes Inc.

The all-cash sale to French utility Suez SA and a Canadian pension fund manager comes about four months after GE put the water unit on the market amid concerns of regulatory pushback against the Baker Hughes combination.

Boston-based GE is overhauling its portfolio to focus on industries such as energy and aviation while tilting away from finance and consumer operations.

“We had an overlap in our water business,” Steve Bolze, chief executive officer of GE Power, told Bloomberg in an interview at an investor meeting in New York on Wednesday.

“The deal with Suez works for the water business, it works for Power and it works for GE’s capital allocation.”

Suez said it would gain broader access to industrial clients and build its international presence, notably in the United States and emerging markets.

“We’re getting into a strategic area, which is growing fast,” chief executive JeanLouis Chaussade said on a conference call.

Suez, which plans to contribute its existing industrial water unit to the venture, will hold a 70% stake, with Caisse de Depot et Placement du Quebec, Canada’s secondbiggest pension fund manager, owning the rest.

GE’s Water & Process Technologies division sells equipment and chemicals for such applications as purification, desalination and wastewater treatment.

While it represents a small portion of GE’s total revenue, water had been a prominent part of the company’s image, featuring in marketing campaigns including the “Ecomagination” television advertisements. Until about a year ago, one of the largest manufacturing divisions was known as GE Power & Water.

Proceeds from the sale will be used to pay costs related to the Baker Hughes merger and as much as $1 billion of additional GE restructuring, the company has said. GE also intends to unload its industrial solutions business.

GE and Baker Hughes said this week that they received requests from the US Justice Department for additional information about the combination, which could extend the waiting period related to the regulatory review. The deal, announced in October, is expected to close in the middle of 2017.

Suez will partly fund the acquisition of GE unit with a bridge loan that will be refinanced with a capital increase of €750 million.

The transaction is expected to close by mid‐2017 and is subject regulatory approvals in the European Union and the US.