GE gets out of plastics business, sells it to Saudi company

General Electric (NYSE: GE), which has worked diligently to reinvent itself as a vendor of clean technologies, today took a drastic step and announced the sale of its plastics division.

GE Plastics is to be sold to Saudi Basic Industries Corporation (SABIC), a global petrochemicals manufacturer, in a deal valued at $11.6 billion in cash plus assumption of liabilities. The closing, subject to customary conditions, is targeted for the third quarter of 2007.

Plastics have traditionally been petrochemical-based, and persist in the world indefinitely unless explicitly recycled. GE Plastics had made strides in recently months moving beyond petrochemicals, introducing PET-derived resins that won environmental awards. But in environmental circles, the term plastics, to many people, still has negative connotations.

"Over the past five years, we have transformed our portfolio of businesses," GE Chairman and CEO Jeff Immelt said. "This transaction is another important step in the execution of this strategy."

GE has long-standing relationships with SABIC and others in Saudi Arabia who buy its energy, healthcare, aviation and high-technology products.

GE is to receive net after-tax proceeds from the sale of approximately $9 billion. Proceeds will be principally used to re-launch a stock buyback, increasing the 2007 planned share repurchase from $6 billion to $7-to-8 billion.

GE Plastics is a $6.645 billion global supplier of plastic resins widely used in automotive, healthcare, consumer electronics, transportation, performance packaging, building and construction, telecommunications, and optical media. It's headquartered in Pittsfield, MA. and employs 10,300 people in 60 locations worldwide.

SABIC is one of the world’s 10 largest petrochemicals manufacturers ranked by market capitalization (currently U.S.$ 80 billion), and is the largest public company in the Middle East. It has more than 17,000 employees worldwide.

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