Mr. Maguire of The Graduate would not have been proud of GE today. It was all about “plastics” for GE but not the pursuit of making products of the future. I guess CEO Jeff Immelt finally realized that the high cost of oil was not going to allow the plastics unit to be profitable any time soon. Frankly, I don’t blame him and if he can get the rumored $10 billion for the group, that would be impressive. They can use those proceeds to buy Vetco for $1.9 billion and make more money on oil rather than losing it on oil in plastics. I guess if you are a company with an underperforming division, all you need to do to boost your stock price is to say you are putting it out for bids to private equity. Problem solved - forget about saying just one word of advice to aspiring businessmen. “Plastics” is the old word, now the future is about two words - “Private Equity”.

Getting 1.5 times the estimated $6.7 billion in 2006 revenues would be amazing given that the top 2 strategic buyers, DOW and BF are trading at 0.7 times sales. Furthermore, if the Citigroup analysts, Jeff Sprague and PJ Juvekar are correct and the plastics unit had $738 million in profit, that would make the $10 billion price tag a 14 multiple. DOW has a PE of 10. But why waste time on small details like fundamental valuations and dilutive acquisitions? Why worry about an industry that generated about 1% revenue growth? Why concern yourself with global competition which reduces pricing power or increasing materials costs from oil inputs? All you need to do is say the magic two words “Private Equity”.

According to the GE Plastics website and in their own words - “GE is a world leader in providing engineering thermoplastic material solutions.” That should come as no surprise for business they have run since 1930 based upon original experiments in plastic filaments for lightbulbs conducted by Thomas Edison in 1893. So forgive me for being incredulous that private equity management will be able to swoop in and do what GE cannot do. And forgive me for questioning the premiums that are being tossed around for this business. If someone wants to pay $10 billion, it really doesn’t matter what I think. Lastly, I wasn’t impressed with GE’s rules for the bidding so they can avoid a bad image or not get into trouble with regulators. They should do whatever they can to get the most ridiculous price possible whether strategic buyers are bidding or a group of private equity guys like Apollo, Bain, Blackstone and KKR collude so they can overpay. Seriously, this whole thing was unimpressive and the market really didn’t buy into it given that GE increased exactly $0.00 on the news from yesterday’s close to today’s close. But remember - it’s not about all that - it’s about the two words I have for you “Private Equity.”