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General Electric makes $1.4B 3D printing play

General Electric Co. (GE) on Tuesday announced the acquisition of two 3D printing companies in Europe, as the company looks to bulk up the technology’s use in the manufacturing of jet engines and cars.

The industrial conglomerate is to acquire Arcam AB and SLM Solutions Group AG, both suppliers of additive manufacturing equipment, for $1.4 billion.

3D printing has become an area of interest for many manufacturing companies as it can help reduce costs. The European 3D printing industry has carved out a niche in the metals additive manufacturing area.

Molndal, Sweden-based Arcam invented the electron-beam melting machine for metal-based additive manufacturing and also produces advanced metal powders. Lubeck, Germany-based SLM Solutions produces laser machines for metal-based additive manufacturing.

The Deal had previously identified SLM Solutions as an M&A target, noting that the company was miles ahead of the competition in technology. “Europe is a hotbed of innovation for this technology” said Bryan Dow, a director at corporate finance adviser Mooreland Partners LLC, in a recent interview.

GE will buy all the outstanding shares for each company. The company offered 285 Swedish kronor a share for Arcam, which represents a 53.2% premium to Arcam’s Monday closing price. The offer values the stock at Skr5.86 billion ($689.3 million), Arcam said. SLM Solutions shareholders will be offered €38 a share, a 36.7% premium on Monday’s close. Based on SLM’s just-under 18 million shares in issue, the offer values the equity at €683.3 million ($766.4 million).

GE will maintain the headquarters and management for each company. GE has invested $1.5 billion in manufacturing and additive technology since 2010.

“We chose these two companies for a reason,” GE Aviation president and CEO David Joyce. “They each bring two different, complementary additive technology modalities as individual anchors for a new GE additive equipment business to be plugged and experience as leading practitioners of additive manufacturing.”

Management of both companies will report to Joyce, who will also lead the integration effort and the GE Store initiative to drive the use of manufacturing applications across GE.

Arcam has retained Carnegie Investment Bank as financial adviser. Baker & McKenzie is its legal adviser. The manufacturing acquisitions comes after GE has significantly shifted its focus by selling over $180 billion in financial assets in an effort launched in April 2015. According to a spokeswoman, GE has signed roughly $192 billion in divestitures deals. Of those, roughly $170 billion in divestitures have closed.

In June, the U.S. government moved to remove a “systemically important” designation on GE that would otherwise have saddled the industrial firm with significant and ongoing regulatory costs.

In addition, activist fund Trian Fund Management LP‘s Nelson Peltz made a $2.5 billion investment in GE last year, shortly after the massive divestiture plan was announced. The allocation came with a white paper mostly backing the company’s divestiture moves.

Speaking at a governance conference hosted by The Street and The Deal in June, Peltz, noted that GE chief executive Jeffrey Immelt urged him to make an investment after the multinational conglomerate’s announcement that it was divesting most of its massive GE credit business. The investment, known by some in the industry as “validation capital,” was intended partly to help revitalize GE’s stock price.

The acquisitions announced Tuesday, which have synergies with GE’s industrial businesses, aren’t likely to be opposed by Peltz. Speaking at the conference, Peltz said he would only be opposed to deals if Immelt made acquisitions in biotechnology or some other sectors “where they don’t have a history.”

Authored by By Lisa Botter & Ronald Orol
C
ompliments of The Deal – a member of the EACCNY