General Electric Company (GE - Free Report) yesterday announced about signing an agreement to divest its Distributed Power business to Advent International. The divestment value has been fixed at $3.25 billion. The move is in sync with the company’s plans to divest assets worth $20 billion.
It is worth mentioning here that Advent International is a globally-renowned private equity investor, operating primarily in the energy, industrial and business services sectors. The firm, founded in 1984, made more than 335 investments in 41 countries as of Mar 31, 2018.
Details of Divestment Deal
Distributed Power is a business arm of GE Power — a General Electric company, headquartered in Schenectady, NY. Distributed Power primarily provides power equipment, reciprocating gas engines and related services. In 2017, this business generated revenues of $1,317 million.
Per the deal, Distributed Power’s manufacturing facilities in Canada, the United States and Austria as well as its reciprocating gas engines — Waukesha and Jenbacher — will be sold to Advent. Post the completion of the deal, Advent intends to make investments to strengthen Distributed Power’s service network, product offerings and technological advancements.
The closure of the deal, currently subjected to the fulfillment of customary closing conditions and receipt of regulatory approvals, is anticipated in the fourth quarter of 2018.
General Electric’s $20-billion Asset Divestment Plan
In 2017, General Electric decided to focus on its three core businesses — Aviation, Healthcare and Power. To achieve this, the company decided to sell assets worth $20 billion to realign its portfolio and improve liquidity.
Earlier, in May 2018, the company announced that GE Transportation inked a definitive agreement to combine with Wabtec Corporation. Per the agreement, the company will receive $2.9 billion in cash at closing as well as receive a 50.1% ownership interest in the combined company. Notably, the deal is likely to close in early 2019.
Zacks Rank & Stocks to Consider
General Electric has a market capitalization of nearly $110.7 billion. In the past three months, General Electric’s shares have declined 5.1%, underperforming 2.7% fall recorded by the industry.
Some stocks worth considering in the industry are Raven Industries, Inc. (RAVN - Free Report) , Federal Signal Corporation (FSS - Free Report) and Honeywell International Inc. (HON - Free Report) . While Raven Industries sports a Zacks Rank #1 (Strong Buy), both Federal Signal and Honeywell carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last 60 days, earnings estimates for these three stocks improved for the current year. Also, average earnings surprise for the last four quarters was a positive 9.78% for Raven, 16.07% for Federal Signal and 1.49% for Honeywell International.
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