General Electric's Proposed Acquisition of Honeywell

23 Pages Posted: 21 Oct 2008

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Sean Carr

University of Virginia - Darden School of Business

Solomon Eskinazi

affiliation not provided to SSRN

Abstract

On March 1, 2001, Jessica Gallinelli, managing director of Bancroft Capital Management, heard surprising and somewhat disturbing news about the proposed bid by General Electric Company (GE) for Honeywell International Inc. Despite recent public assurances about the deal from GE's chairman and chief executive officer (CEO), John F. “Jack” Welch Jr., the antitrust regulatory authority of the European Commission (EC) announced it had initiated a review of the proposed merger. Gallinelli, whose fund owned a large stake in Honeywell, considered this major development and wondered whether Bancroft should alter its investment. Immediately, Gallinelli instructed her associate to provide background material on the merger, an assessment of the probability the merger would be approved by antitrust regulators in the U.S. and Europe, and valuation analyses to assist Gallinelli in assessing Bancroft's investment in Honeywell. She would need to decide quickly whether to hold or sell her fund's 10 million shares in Honeywell and short position of 10 million shares in GE. As a risk arbitrageur, she thought prices would respond rapidly to the EC's announcement. She remembered Jack Welch's confidence of five months earlier that this was the “cleanest deal you'll ever see,” and she wondered whether that was still the case.

Excerpt

UVA-F-1493

Rev. Sept. 24, 2008

GENERAL ELECTRIC'S PROPOSED ACQUISITION OF HONEYWELL

You got a commitment from our management team that's delivered to make this the most successful acquisition in industrial history. And I tell you we're going to do that, and that's what's going to happen here … Look at product line by product line, component by component by component, and there is no index by any calculation one can make anywhere that says there is one issue. From an emotional standpoint one might make a comment about it, but from any factual base, this is the cleanest deal you'll ever see.

—John F. Welch Jr., October 23, 2000

On March 1, 2001, Jessica Gallinelli, managing director of Bancroft Capital Management, heard surprising and somewhat disturbing news about the proposed bid by General Electric Company (GE) for Honeywell International Inc. Despite recent public assurances about the deal from GE's chair and CEO, John F. “Jack” Welch Jr., the antitrust regulatory authority of the European Commission (EC) announced that it had initiated a review of the proposed merger. Gallinelli, whose fund owned a large stake in Honeywell, considered that major development and wondered whether Bancroft should alter its investment.

. . .

Keywords: merger, acquisition, valuation, arbitrage

Suggested Citation

Bruner, Robert F. and Carr, Sean and Eskinazi, Solomon, General Electric's Proposed Acquisition of Honeywell. Darden Case No. UVA-F-1493, Available at SSRN: https://ssrn.com/abstract=1279945

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-3823 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://faculty.darden.edu/brunerb/

Sean Carr

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4812 (Phone)

HOME PAGE: http://www.batteninstitute.org

Solomon Eskinazi

affiliation not provided to SSRN ( email )

No Address Available

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
499
Abstract Views
2,846
rank
65,789
PlumX Metrics