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Selling off dull businesses
posted by
Vivek Sharma
21 May 2008, 16:51
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labels: companies, corporate restructuring, mergers/acquisitions
America is selling a piece of its consumer history. If you are old enough to have childhood memories of flipping through American magazines and remember being fascinated by the myriad appliances brought out by this company with a logo of twisted letters, you will have some idea of how big the appliances business of General Electric once was. It was those electrical appliances that made GE a household name in America and an iconic brand globally.
That was then and GE moved on to dominate many other businesses, from aircraft engines to Hollywood movies. As it lost ground steadily to other manufacturers, appliances became a peripheral business for GE. The division generates revenues of around $7 billion annually, less than 4 per cent of total GE revenues, and accounts for just around 3 per cent of total employees.
Now, CEO Jeff Immelt has decided to get rid of it to the highest bidder. Stung by the disappointing performance during the Jan-March quarter, when the numbers fell awfully short of GE’s own guidance, Immelt is under pressure to divest non-core businesses. Appliances, which is expected to fetch up to $5 billion, may only be the first in line. Potential buyers include Haier, LG and Samsung.
Just as GE announced its intention to get out of appliances, homegrown engineering and infrastructure conglomerate L&T severed its remaining link with the cement business. L&T is selling its ready-mix concrete business to French cement major Lafarge for over Rs1,400 crore. L&T had earlier sold its cement business, later renamed Ultratech Cement, to Aditya Birla group. L&T retains a minority stake in Ultratech which is expected to be sold off at a later date.
For L&T, sale of its ready-mix concrete business makes sense. The company is getting rid of a loss making business and will net some cash, which it says will be used to expand the infrastructure business. For Lafarge, a focused cement player, the acquisition strengthens its position in the country.
The domestic cement sector is fast becoming the battleground of three European companies - Holcim, Lafarge and Heidelberg – and the Aditya Birla group.
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