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GE Sells Water Unit in $3.4 Billion Deal to Smooth Oil Merger





NEW YORK — General Electric Co. has agreed to sell its water unit in a $3.4 billion deal, putting the industrial giant a step closer to the planned merger of its oil division with Baker Hughes Inc.

The all-cash sale to Suez SA, a French utility, and a Canadian pension fund manager comes about four months after GE put the water unit on the market amid concerns of regulatory push-back against the Baker Hughes combination. Boston-based GE is overhauling its portfolio to focus on industries such as energy and aviation while tilting away from finance and consumer operations.

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“We had an overlap in our water business,” said Steve Bolze, chief executive of GE Power.

Suez said it will gain broader access to industrial clients and build its international presence, notably in the United States and in emerging markets. The utility’s growth has been undermined by low inflation and sluggish industrial demand for its services in Europe. The transaction will help grow earnings per share and cash flow within the first year, it said.

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“We’re getting into a strategic area, which is growing fast,” chief executive Jean-Louis Chaussade said. GE’s water unit had about $2.1 billion euros of revenue last year, half of which came from the United States. The company is well positioned in an industrial water market that’s expected to grow by 5 percent a year, Suez said.

Meanwhile, GE chief executive Jeffrey Immelt got a $21.3 million compensation package last year, down 35 percent from 2015, as challenges in the oil and gas market suppressed demand for equipment and the company’s shares underperformed.

Immelt, 61, received a $3.8 million salary and $5.94 million in cash awards, according to a proxy statement from the company Wednesday. The package also included restricted and performance-linked shares worth $4.67 million and $2.14 million in stock options.

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After a sweeping transformation in recent years that tilted GE away from finance and strengthened its equipment-manufacturing operations, its momentum slowed in 2016. Challenges in the oil and gas market, coupled with slow demand for locomotives, weighed on growth efforts. GE shares returned 4.6 percent in 2016, including dividends, compared with 12 percent for the S&P 500 Index.

“Normally, we expect our diversified model to shrug off headwinds in one market and continue to achieve our goals,” Immelt wrote to shareholders Feb. 24. “In 2016, we simply couldn’t outrun pressure in the resource markets. Consequently, our compensation plans only paid out at 80% of target. This gives us more motivation for 2017.”

Suez, which plans to contribute its existing industrial water unit to the venture, will hold a 70 percent stake, with Caisse de Depot et Placement du Quebec, Canada’s second-biggest pension fund manager, owning the rest.

GE’s Water & Process Technologies division sells equipment and chemicals for such applications as purification, desalination, and wastewater treatment. While it represents a small portion of GE’s total revenue, water had been a prominent part of the company’s image, featured in marketing campaigns.

Proceeds from the sale will pay costs related to the Baker Hughes merger and as much as $1 billion of additional GE restructuring, the company has said. GE also intends to unload its industrial solutions business.

GE and Baker Hughes said they received requests from the US Justice Department for additional information about the combination, which could extend the regulatory review.


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