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Would Berkshire be interested in buying GE's Aviation or Energy business?


yesman182
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Listening to GE's CEO this week, he seemed open to the possibility of selling one of the three new businesses they are splitting off to another company. Any chance Berkshire would make an offer to buy the aviation or energy business from GE? I know Berkshire isn't interested in bidding wars, or hostile takeovers, but this seems like an opportunity to buy an elephant. 

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The crown jewel is GE Aviation, but Buffett is probably by now all against anything remotely close to aerospace.

 

The healthcare division will be a stand alone as a tax-free spin off, which means GE probably looked at potential buyer paying cash and had to weigh in the offer value vs. the tax it had to paid. And chose a tax-free spin off. About 7-8 years ago, UTC went through the same exercise but did find a willing buyer for its Sikorsky division. The offer was high enough to offset the tax bill.

 

The GE power/renewable needs to be hammered into a division before its spin-off. They need to put some lipstick on that pig before floating it to Wall Street, so really who wants that.

 

All in all, they have not shared much about the capital structure of the new companies either. It is my firm belief that GE Aviation would need to scale-up once it freed itself of these two spin-offs. 

 

EDIT: in fact, who knows maybe Larry Culp will be buying Precision Castparts from Uncle Warren for his new GE Aviation

Edited by Xerxes
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20 hours ago, Xerxes said:

The crown jewel is GE Aviation, but Buffett is probably by now all against anything remotely close to aerospace.

 

The healthcare division will be a stand alone as a tax-free spin off, which means GE probably looked at potential buyer paying cash and had to weigh in the offer value vs. the tax it had to paid. And chose a tax-free spin off. About 7-8 years ago, UTC went through the same exercise but did find a willing buyer for its Sikorsky division. The offer was high enough to offset the tax bill.

 

The GE power/renewable needs to be hammered into a division before its spin-off. They need to put some lipstick on that pig before floating it to Wall Street, so really who wants that.

 

All in all, they have not shared much about the capital structure of the new companies either. It is my firm belief that GE Aviation would need to scale-up once it freed itself of these two spin-offs. 

 

EDIT: in fact, who knows maybe Larry Culp will be buying Precision Castparts from Uncle Warren for his new GE Aviation

GE Aviation doesn’t have the cash and  Warren Buffett isn’t selling.

 

I think GE’s crown jewel is GE Healthcare not GE aviation.

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Not likely at all IMHO.  Why rush when Mr. Market is not giving you a bargin?  The operating business is booming, they are retiring a ton of stock, and cash is at a record high.  Ted Williams strike zone anyone?  I dont think so...

Edited by ValueMaven
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2 hours ago, Spekulatius said:

GE Aviation doesn’t have the cash and  Warren Buffett isn’t selling.

 

I think GE’s crown jewel is GE Healthcare not GE aviation.

 

Admittingly, i got a bias toward aerospace.

 

That aside, my limited understanding of GE Healthcare's history tell me that the actual 'crown jewel' of the GE Healthcare was sold to Danaher (Larry Culp's old outfit) for a cool $20 billion cash that went to pay down the debt at the group level. Prior to Larry's taking over as CEO, John Flannery who was the CEO for a limited time tried to spin of Healthcare with that crown jewel in it. That was deemed the wrong strategy by the powers be, since at the time, a melting GE was not going to capture any of the windfall of that spin off, only GE' shareholder would have. To be more accurate it was not a full spin off, it was akin to raising equity with an IPO and spining off the rest. So some equity would have remained with GE.

 

Long story short, when the Larry Culp regime took over, they stopped that, and decided to in fact to get hard cash for that business by selling to Danaher. So the spin off today does not have that business in it.

 

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Mr. Buffett bought preferred shares of GE back in 2008.  Considering GE has been a powerhouse business for half a century - he has been studying the business since he was in the womb (exaggerating but you get the point).  If there is anyone on the planet qualified to purchase shares or an entire business unit - its Mr. Buffett.  I'm curious like all of us could he/would he buy some assets from GE.  I sleep easy thinking that if there is an opportunity at our price, Mr. Buffett will execute.  

 

My hope is Mr. Buffett is discussing his thoughts on transaction with Gregg and/or Ajit.  Thinking in terms of perpetuation.  The GE spin off is a great learning opportunity for managers to see - complicated and complex with tax implications.  Interesting to ponder - no doubt they got a call on something GE related.  

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