The Blogs covering the security industry are quite dismissive of the quality of products and service of their security division and doubt that any of the majors would be interested unless it was at a fire sale price. The heritage estate would be the only attractive asset, whilst the products would just duplicate with no leading edge technology, is the claim being made.
However their Fire Detection business is a much more tasty morsel. Built around the Edwards System Technologies acquisition of $1.4 billion in March 2005, this is a well respected business having a significant market share in an industry that is more mature and far less fragmented than the security market. The opportunity to buy a Fire Detection business of this size and geographic coverage is unlikely to happen again for many years. It may not have the growth prospects of the security industry but neither does it have the hundreds of small innovative companies creating a constant need to develop new products.
We believe that the Fire Detection business will be key to the acquisition strategy that will unfold during the next few months. The last major fire business to be sold was Novar in 2005, completed 2006 and it has given the acquirer, Honeywell, the number 1 slot in Europe. The other majors in this business Tyco, UTC, Siemens and Bosch must have a real interest in this opportunity and will put up a stronger fight than last time. Significantly these companies are also major players in the security industry. If Schneider want to make a push into Fire Safety, this is the time and they will not be hampered by any monopolistic considerations.
The next few months will for sure see a flurry of interest and activity. This acquisition is complex because of its size and the number of different businesses making up GE Fire & Security and the current economic climate. A break up is likely to produce the best outcome for GE.