General Electric Co will acquire the aerospace unit of UK-based Smiths Group to strengthen its presence in the aviation equipment market. GE will pay $4.8 billion in cash, and the deal is subject to regulatory approvals and approval by Smiths' shareholders.

GE is the largest manufacturer of aircraft engines, and its financial services division is the largest player in commercial aircraft leasing.

Smiths Aerospace has more than 11,000 employees and had $2.4 billion in revenues in 2006. Smiths Aero has a significant presence on most commercial aircraft, including the Boeing 737 and Airbus A320, as well as many military aircraft. More importantly, Smiths has a major presence on new generation aircraft such as the Boeing 787, Airbus A380 and the F-35 Joint Strike Fighter.

Smiths' products include flight management systems, airborne platform computing systems, power generation, conversion and distribution products, actuation products and systems for flight control, thrust reversers and landing gear applications, various engine components and a global customer services organisation.

GE Aviation, headquartered in Evendale, Ohio, has 26,800 employees and had $13.2 billion in revenues in 2006. Its products include jet engines for civil and military aircraft, as well as aero-derivative engines for marine applications. GE Aviation also operates a worldwide network of engine services facilities.

The combined entity would be a major supplier of critical components to aircraft and aircraft engine manufacturers. Combined annual revenues would exceed $15.5 billion with an employee base of nearly 28,000.

"Smiths Aerospace is a world-class business and a great extension of our aviation business. Like GE, Smiths has built its business by investing in technology and innovative products and services. GE and Smiths fit together well because our product offerings are complementary, and because we have similar customers and deep domain expertise in this industry", GE chairman and CEO Jeff Immelt said.

"This acquisition is consistent with our strategy to invest in high-technology infrastructure businesses that deliver strong growth, earnings expansion and higher margins. GE Aviation is growing about 10 per cent a year and this acquisition gives us a technology growth platform that will be accretive to our net income, and will deliver immediate and future value for our investors", Immelt said.

GE also announced that it has signed a letter of intent with Smiths Group to create a detection joint venture with a portion of GE's security business. The joint venture, to be called Smiths GE Detection, will be headquartered in London. The JV will include GE Security's homeland protection business and Smiths Detection.

Upon completion of the transaction, GE will own 36 per cent and Smiths 64 per cent of the joint venture, and both companies will have board representation, with Smiths having a majority. The definitive agreement is expected to be signed in the second quarter.

The transaction will be subject to approval by Smiths' shareowners as well as customary regulatory reviews, and will be conditioned on the completion of GE's acquisition of Smiths Aerospace.