A mega-merger between Honeywell International Inc. and General Electric Co. has implications for more than 1,300 Honeywell employees in San Diego and Tijuana, but what those are have yet to be determined.
The proposed $45 billion acquisition of Honeywell by GE, announced Oct. 22, comes about a year after Honeywell, formerly based in Minneapolis, was itself acquired by Allied Signal Inc., a diversified, industrial manufacturer. Allied assumed Honeywell’s name and moved its headquarters to New Jersey.
Tom Crane, a spokesman for Honeywell in Morris Township, N.J., said except for some obvious ones, the impacts from the merger are still unknown.
“It’s just too soon to speculate how any one facility may be impacted by the merger,” he said.
Honeywell operates a Tijuana maquiladora that employs about 1,100 workers and a smaller plant in Otay Mesa at the Brown Field Business Park with about 220 workers.
Both plants manufacture gas valves and other home and building temperature control devices.
Building controls are but one business for the $25 billion corporation. Others include avionics, automotive products, power generation systems, specialty chemicals, fibers, plastics, and electronic advanced materials. It employs about 120,000 people in 95 countries.
While the firms said the merger of the two Dow Jones Industrial 30 companies was a perfect fit and didn’t have much overlap in operations, the resulting company will certainly result in some layoffs.
“I assume because (GE’s) company headquarters is in Fairfield, Conn., that our headquarters office will be phased out,” Crane said.
That could mean the potential loss of about 550 people who hold corporate administrative jobs in Morris Township that are concurrently held by GE employees.
Merger Ramifications
Locally, the possibility of duplication is far less, since building controls is not one of GE’s core businesses.
Another unknown element to the merger involves the required regulatory approval. The size and dominance of the respective partners in certain businesses may be so great that federal regulators will require them to divest part of the operations, said Nikhil Varaiya, professor and chairman of SDSU’s finance department.
Varaiya said GE has a reputation of being very good at acquiring and integrating companies into its corporation, although the Honeywell purchase would be GE’s largest.
“They’ve been very successful in terms of their financial performance,” Varaiya said. “If anyone can do it, these guys can.”
The key determinant for a successful merger is the premium paid by the acquiring company. Under the definitive agreement, Honeywell shareholders will receive 1.055 shares of GE stock for each of their Honeywell shares.
Market Price
At the time the deal was struck GE’s closing price was $52.25, which translated to Honeywell shareholders getting $55.12 in GE stock, and put the total value at about $45 billion. The offer includes GE assuming about $3.4 billion in Honeywell’s outstanding debt.
However, since the merger was announced the stocks of both firms have slid, with GE trading close to $52 as of Oct. 26. That meant the value of the combined deal had declined to about $43.7 billion.
Still, the agreed price was larger than the $50 per share Honeywell would have received from United Technologies Inc., the Hartford, Conn.-based firm originally bidding for Honeywell.
When GE chairman and CEO Jack Welch found out about UT’s offer, he countered with an offer that Honeywell’s board decided they couldn’t refuse.
As part of the agreement, Welch, who turns 65 next month, will not retire as previously announced, but will stay on as chairman until the end of 2001.
GE, a diversified technology, services and manufacturing company, anticipated 2000 revenues of $130 billion. It employed more than 340,000 people worldwide and had operations in more than 100 countries.
