EU States Urged to Block GE-Honeywell

The staff of the European Commission recommended that European Union member countries reject General Electric Co.’s proposed purchase of arms contractor Honeywell International Inc., sources familiar with the situation said.

The recommendation, made on competition grounds, was contained in a draft decision that was sent to the 15 member countries Friday, the sources said.

A spokeswoman for GE said she was unable to confirm the development, but said that such a development would be in line with the company’s expectations. On Tuesday, GE President Jeffrey Immelt was quoted as saying that the company expected the commission to reject the proposal, despite concessions offered by GE last week.

The EU is due to make a decision by July 12 on whether to allow the deal, which has been approved by U.S. and Canadian antitrust regulators, to go ahead.

GE last week offered to sell assets generating $2.2 billion in annual revenue and limit operations of its General Electric Capital Aviation Services (Gecas), which buys, sells and leases airliners.

The sources said that, while EU states received the commission staff’s recommendation to reject the deal on Friday, the EU countries had not yet received details of GE’s latest offer.

And, while the recommendation was a further step toward rejection by the EU, it was procedural and was by no means final, the sources said.

Honeywell’s shares fell for the first time in three days, dropping 3.8%, as the prospects for approval diminished. The shares fell 46 cents to $38.04 in after-hours trading after closing at $38.50, down $1.50 on the New York Stock Exchange. GE shares declined 13 cents to $48.87.