26 June 2002 | Robin Parker
General Electric has sold the majority share of its e-commerce arm, GE Global eXchange Services (GXS) after nearly 40 years, citing a lack of a strategic fit.
US technology buy-out fund Francisco Partners has bought a 90 per cent share in the division, which will continue to operate as a separate company. GE will retain the remaining 10 per cent share.
GXS, which was set up in the early 1960s, is valued at $800 million, and GE is expected to profit by about $500 million from the deal when it closes in October.
It gives Francisco control of one of the largest global B2B e-commerce offerings, including an EDI network and e-marketplace solutions, on which more than 100,000 members hold 1 billion transactions a year.
Steve Scala, vice-president of marketing at GXS , said the near-disposal was the result of a restructuring at the parent GE company to focus on its core areas.
"It was the smallest of the 12 companies that reported directly to the chairman, and was found to be too small to impact significantly on GE's financial performance," he said.
"GE itself will continue to be the largest customer, accounting for about 5 per cent of GXS's revenues, but it will take a back seat with the running of the company."
Scala predicted that Francisco would fully acquire GXS by the end of the year. In the short term it will retain the GE brand, but this is likely to be revised to fit the new parent company.
He insisted that GXS's production schedule, personnel and office locations would not be affected by the move, and that customers would benefit from Francisco's $2.5 billion in assets.
The deal marks the fifth addition to Francisco's portfolio, alongside mobile software solutions firm XcelleNet, communication software suppliers Legerity and AKQA, and semiconductor manufacturer AMI.