GE Security Reported to Be on Auction Block

BRADENTON, Fla.

August 26, 2009 SSI Staff

General Electric (GE) has put its security business up for sale in an auction that could fetch about $2 billion, according to news reports.

GE hired JPMorgan Chase & Co as its financial adviser to sell the unit, according to Reuters.

The potential sale of the unit was first reported by Bloomberg News. The report says possible suitors include Tyco Int’l and United Technologies Corp. (UTC).

GE Security, which manufacturers a range of security and fire/life-safety products, could be sold in pieces if a buyer for the entire unit fails to emerge. In April, GE sold a majority stake in GE Security’s homeland protection business to Paris-based Safran SA.

“We officially have no comment on rumors and have no announcements to make at this time,” GE spokeswoman Michelle May told Reuters.

A potential sale has been strongly rumored on at least two occasions in the past three years, Walter Bailey, CEO and managing director of New York-based The EpiGroup, an investment banking and research firm covering the security industry, tells SSI.

GE first made its move into the electronic security industry in late 2001 with the acquisition of Interlogix, which itself was created from the merger of Interactive Technologies Inc. (ITI) and SLC Technologies in 2000. Several noteworthy acquisitions were to follow, including InVision Technologies Inc. and Edward Systems Inc., both in 2005.

Together the acquisitions provided GE Security with respected product lines and technologies, but ultimately it has proven difficult for the company to gain sufficient traction in the marketplace, Bailey says.

“There aren’t that many big companies that have had a great deal of success at integrating the smaller technology companies and leveraging them in a way to get an adequate return off the required investments,” Bailey says. “At the end of the day, GE has to exercise its discipline. It is difficult to have a business as big as GE Security sitting on a platform that is underperforming relative to corporate objectives … those being adequate return on invested capital and profitability.”

Rumors of a potential sale have left some installing security contractors wondering what will become of GE Security’s commercial and residential dealer program.

“The news reports do not surprise us,” says Nikki Johnson, director of marketing for Rochester, Minn.-based Custom Alarm, a GE Security Pro dealer for more than six years.

Johnson says there have long been continuous rumblings within the GE Security Pro community about a perceived lack of commitment by GE to fully embrace the electronic security industry.

“They have not really come up with anything new and innovative since they acquired the security part,” she says. “In other areas of the GE business you see them introducing new and innovative ideas, but on the security side it really has been the same product lines since the beginning.”

Many Security Pro members also often lament about GE not flexing its marketing muscle enough to support its security unit, Johnson says. “You have the big GE brand awareness but there has never been a big push on GE’s part to promote security. I’m not sure it was the biggest priority under the GE umbrella.”

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