General Electric to sell distributed power business to Advent for $3.25bn

General Electric has agreed to sell its Distributed Power business to private equity firm Advent International for $3.25bn as it looks to simplify its structure.

The deal includes the business's Jenbacher and Waukesha engines, as well as manufacturing sites in Austria, Canada and the US.

Carlos Lange, president of the distributed power business, said: "In Advent, we have a partner that shares our team’s passion for delivering outstanding customer outcomes. Our Jenbacher and Waukesha brands and engines are recognised all over the world for their performance and reliability, and Advent’s deep sector expertise will allow us to further strengthen our capabilities for the benefit of our worldwide customers. Advent will help accelerate our growth as we continue to execute on our priorities."

In the year ended 31 December 2017, Distributed Power - which provides reciprocating gas engines, power equipment and services focused on power generation and gas compression at or near the point of use - generated sales of $1.32bn.

Ranjan Sen, managing partner at Advent, said: "Distributed Power is a terrific asset with highly regarded engines that are the go-to original equipment maker for the efficient generation of electrical power and heat as well as gas compression.

"The business has significant growth potential on a global scale and talented employees all over the world. We plan to invest substantially in critical areas such as the product portfolio, service network and digitization to support Distributed Power in sustainably strengthening its market position."

The transaction is expected to close by the fourth quarter, subject to customary closing conditions and regulatory approvals.

RBC Capital Markets said: "This deal should not come as a major surprise, as there have been media reports since April that GE was shopping the business to potential buyers, with Cummins and Wartsila among the interested parties. We highlight that Distributed Power was operated mostly as a standalone business within the GE Power portfolio, so we do not foresee any significant dis-synergies or complications with separating it in a sale.

"In terms of the stock reaction, we do not believe that this $3.25bn deal is a major needle-mover, as it represents just the latest small asset sale from GE’s ongoing portfolio streamlining initiative, which had targeted at least +$20bn of non-core asset sales over the next 1-2 years. But the announcement checks the box on another divestiture/simplification action by CEO John Flannery."

At 1615 BST, GE shares were down 1.3% to $12.88.