GE Gets Windfall in PaineWebber-UBS Deal

NEW YORK —  General Electric Co. finally is seeing a payoff from its ill-fated foray into the brokerage industry.

The diversified conglomerate, whose businesses range from lightbulbs to aircraft engines, will receive a $2.3-billion windfall from its 22% stake in PaineWebber Group, which Wednesday agreed to be acquired by Switzerland’s UBS in a $10.8-billion deal.

The merger brings to a close GE’s 14 years of dabbling in the brokerage industry, which began with the 1986 purchase of former Wall Street brokerage Kidder Peabody & Co. and quickly turned sour.

“Anyone who knows GE’s history in the brokerage business, knows we weren’t so good at that game,” Jack Welch, GE’s chairman, said Wednesday. “We’re pleased with the merger of PaineWebber and UBS.”

The deal “represents a considerable capital gain for GE and goes a long way toward recouping the losses that it took in the liquidation of Kidder in 1994,” said Goldman Sachs analyst Martin Sankey.

GE’s shares rose $1.50 to $53.75 on the New York Stock Exchange.

GE bought Kidder in 1986 for $600 million and incurred heavy losses before selling the unit in 1994 to PaineWebber in exchange for $670 million and the equity stake, which now stands at 31.5 million shares.

That 12% return on its eight-year investment was overshadowed by a $1.2-billion loss from Kidder’s operations booked by GE in 1994.

The loss, due in part to fallout from a rogue Kidder trader, was in addition to costs associated with fighting lawsuits brought by shareholders who were furious about GE’s weakened performance as a result of Kidder.