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Cummins a finalist to make $3.5B acquisition from General Electric

June 3, 2018
General Electric Co. is moving closer to a sale of its industrial gas-engine business for more than $3.5 billion after narrowing the list of bidders, according to people familiar with the matter.

Manufacturers Cummins Inc. and Kohler Co., as well as a group comprised of investment firms KKR & Co. and B&C Industrieholding GmbH, advanced to the next round of bidding, said the people, who asked not to be identified because the discussions are private.

An acquisition by Cummins would add to the Columbus-based company’s industrial diesel and natural gas engines and generators used in mining and oil and gas production, as well as data centers and hospitals.

The final pool hasn’t been determined and may still include other bidders, the people said. An initial bid had also been submitted by marine-engine producer Wartsila Oyj, the people said.

Representatives for GE, Cummins, Kohler and B&C Industrieholding declined to comment. Representatives for KKR and Wartsila didn’t immediately respond to requests for comment.

A sale of GE’s distributed power business, which includes the Jenbacher and Waukesha engines that run on natural gas or other fuels, would be one of the final deals under CEO John Flannery’s plan to shed $20 billion of assets. He’s already agreed to unload the locomotive unit and a portion of GE Healthcare to simplify the company and refocus on key markets such as aviation and energy.

The changes are part of a broader effort by Flannery to reshape the Boston-based company and arrest one of the deepest slides in GE’s 126-year history. The CEO is also cutting costs, rethinking the corporate structure and weighing a possible breakup.

GE agreed last week to an $11.1 billion deal to merge its century-old locomotive manufacturing business with Wabtec Corp. GE will receive $2.9 billion in cash when the deal closes, which is expected in early 2019.

Investors are keeping a close eye on GE’s portfolio changes in the hope that the proceeds can provide a buffer as the company grapples with debt and cash-flow challenges. GE has said it anticipates disposition-related proceeds of $5 billion to $10 billion this year, depending on the timing of the distributed power and rail deals.

Kohler, based in Kohler, Wisconsin, is best known for its plumbing and fixture business. The GE operations would complement its line of smaller gasoline and diesel engines and generators, many of them in the range of 100 horsepower or less.

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