Government conditionally approves GE-Honeywell merger

<br>WASHINGTON (AP) _ General Electric Co. will be allowed to acquire Honeywell International Inc., but not without a sacrifice. <br><br>The Justice Department agreement sanctioning the deal requires Honeywell

Thursday, May 3rd 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ General Electric Co. will be allowed to acquire Honeywell International Inc., but not without a sacrifice.

The Justice Department agreement sanctioning the deal requires Honeywell to divest its helicopter engine business and authorize new third-party maintenance and repair service for some of its aircraft engines.

In announcing its decision Wednesday, the department said the U.S. military would have faced higher prices, lower quality and reduced innovation without the divestiture.

Final approval of the $42 billion deal hinges on the negotiation of a consent decree with the companies, the department said in a statement Wednesday evening.

Meanwhle, European officials are continuing to review the deal

``The Department of Justice has informed the EU of the decision,'' European Union Commission spokeswoman Amelia Torres said Thursday. ``We have no comment to make on the U.S. decision, which it respects.''

GE chairman and chief executive Jack Welch said the company remains ``positive about that process.''

``We are pleased with the DOJ's action,'' said Welch. ``Honeywell is a great fit for GE.''

Honeywell's chairman and chief executive, Michael Bonsignore, said the decision allows the companies to focus on seeking European approval of the merger.

``All of us at Honeywell are excited about the long-term shareowner value that will be created by the combination of our two companies,'' he said.

Shares of GE were off 73 cents to $48.25 in morning trading on the New York Stock Exchange, while shares of Honeywell fell 55 cents to $48.50.

GE and Honeywell are the two premier manufacturers of U.S. military helicopter engines. GE dominates the market for aircraft engines and servicing, while Honeywell is the predominant supplier of aircraft electronics for commercial jets. Honeywell also dominates the market for air traffic control systems.

The merger as originally proposed would have ``substantially lessened competition'' for the production, maintenance and repair of the engines, Justice said.

``Without this divestiture,'' its statement said, ``the U.S. military would likely have faced higher prices, lower quality and reduced innovation in the design, development and production of the next generation of advanced U.S. military engines.''

Constance K. Robinson, director of operations and merger enforcement for the antitrust division, said that commercial business aircraft users would likely have paid higher prices in the repair and overhaul of Honeywell engines.

The two companies are partners on projects such as a $196 million contract to develop gas turbine engines for U.S. Army battle tanks and an artillery system, and on a deal with Fortune Electric Co. of Taipei to develop lighter and cheaper electrical distribution transformers.

GE produces power plant parts, aircraft engines, appliances and owns the NBC television network. Honeywell manufactures equipment for aerospace systems, power generation, transportation and factory automation, as well as chemicals, plastics, fibers and other materials.