French aerospace and technology group Safran is to buy 81% of GE Homeland Protection for $580m, boosting Safran’s presence in the fast-growing security market and giving General Electric some much-needed cash.

GE Homeland Protection provides equipment and services to protect airports, ports and national borders. US conglomerate GE will still own a 19% stake in the company following the deal with Safran.

Safran said the GE Homeland Protection acquisition – which will be paid in cash from existing reserves – would boost its share of the security services sector.

For GE, the sale raises cash for the bellwether US group which has been hit by the financial crisis and been forced to cut its dividend.

“This makes Safran a pivotal player in the security market, a business that will generate 20% of the group’s total revenues in the medium term, with double-digit profit perspectives and reducing exposure to aerospace cycles,” Safran chief executive Jean-Paul Herteman said in a statement.

GE under pressure

Safran shares, which rose 6% on Thursday, were up 1.1% in mid-morning trade at €9.31 to give Safran a market capitalisation of around €3.8bn.

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HMG Finance fund manager Francois Garnier said that while the acquisition appeared expensive, it was a good strategic move for the French company.

“It’s a good acquisition, but at a high price,” said Garnier, whose firm owns 20,000 Safran shares.

GE Homeland Protection had 2008 sales of $260m – meaning that Safran is paying more than two times turnover to buy the controlling stake.

Safran CEO Herteman told French newspaper La Tribune that while the company’s immediate focus would be on integrating its recent acquisitions, it still aimed to gain more market share in the security services sector.

The companies said the transaction was expected to be finalised by mid-2009.

Earlier this week, GE CEO Jeff Immelt received a hostile reception from shareholders over the company’s decision to slash its dividend by 68%.

The financial crisis has hit the company’s GE Capital finance arm and the conglomerate has said that the dividend cut should save it about $9bn a year.

GE shares, which fell to an 18-year low of $5.87 in March, closed up 0.7% at $11.88 on Thursday to give GE a market capitalisation of roughly $126bn.

By Sudip Kar-Gupta.