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After a lightning strike Friday, General Electric Co. announced — as expected — the acquisition of Morristown, N.J.-based Honeywell International Inc. for $45 billion dollars in stock and the assumption of $5.5 billion in debt. The Fairfield, Conn.-based GE will issue 1.055 shares for each share of Honeywell. The deal has no collars and has a breakup fee equal to 3% of the purchase price. General Electric Chairman and CEO Jack Welch will postpone retirement until the end of 2001 while grooming a successor he plans to announce within the next month. Honeywell CEO Michael Bonsignore and two other Honeywell directors will join the GE board. For Welch, the deal represents a climax to a near-legendary career at GE. Pending regulatory clearance and approval of Honeywell shareholders, closing is expected early next year. The deal does not require GE shareholder approval. Geoffrey Boisi and Doug Braunstein of Chase Manhattan Corp. advised GE with legal counsel from Shearman & Sterling. A team from Bear, Stearns & Co. Inc., led by Denis Bovin, advised Honeywell while a team of Skadden, Arps, Slate, Meagher & Flom LLP, headed by partner Peter Atkins, offered legal counsel. The deal represents a coup for Bovin’s Bear team, which helped Honeywell and AlliedSignal combine last year. Although Welch predicted there would be no antitrust problems, regulatory observers argue that the deal could take longer to approve than the four months the GE chairman predicted. The equity markets, meanwhile, responded to the announcement by knocking 4.5% off GE shares to $49.75 and bidding Honeywell up $49.875, or 3.875%. The reason may be that institutional investors favor the merger but are looking to ride the uptick of Honeywell shares. The Honeywell transaction is the largest in GE’s long history and analysts believe it may lead to a string of follow-on deals to fill gaps in the company’s expanded portfolio of businesses. “It opens up a much broader set of opportunities for us than financial services,” Welch said in a conference call Monday. Investors bid up shares of industrial automation companies and aviation equipment suppliers in response to Welch’s suggestion. For instance, shares of Milwaukee-based Rockwell International Corp. soared 14% Monday as traders piled into manufacturer of industrial automation equipment and avionics. Rockwell shares had slumped earlier this month after the company lowered earnings guidance due to weak demand from automobile industry. One-quarter of Rockwell’s automation sales are to the auto industry. However, Rockwell’s Collins aviation division accounts for one-third of revenue and overlaps with Honeywell’s aerospace electronics business. Also mentioned as possible targets to fill holes in GE’s portfolio were Schneider Automation Inc., a North Andover, Mass.-based subsidiary of France’s Schneider Electric, Japan’s Omron Corp. and British conglomerate Invensys PLC. Copyright (c)2000 TDD, LLC. All rights reserved.

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