FAIRFIELD, Conn. — General Electric Co. agreed to buy Honeywell International Inc. for about $48.4 billion in stock and assumed debt, and Jack Welch agreed to extend his term as chairman and chief executive by at least eight months to help oversee the company's biggest-ever purchase.
General Electric will exchange 1.055 shares for each share in the aerospace and automated controls company, or about $55.12 a share, based on Friday's closing prices. General Electric's stock fell as much as 4.3 percent in early trading Monday, while Honeywell rose as much as 11 percent.
Welch, who was scheduled to retire in April, has increased General Electric's market value by more than $500 billion during his tenure of almost two decades. The Honeywell purchase combines the companies' complementary businesses in aerospace, power, plastics and industrial systems.
Welch's staying "will be of comfort to the investor," said Robert Spremulli, an analyst at Teachers Insurance and Annuity Association-College Retirement Equities Fund, which owned more than 101 million General Electric shares and more than 14.5 million Honeywell shares. "The success has been phenomenal."
General Electric's bid topped a $50-a-share, or $40 billion, offer from United Technologies Corp. made last week. General Electric is paying $45 billion in stock and assuming $3.4 billion in Honeywell debt.
The purchase comes 10 months after the former AlliedSignal bought Honeywell and assumed the name. Honeywell's shares have dropped by about a third since then, as the company lowered profit forecasts for this year and next because of higher costs and slowing demand.
Honeywell's offices in Morris Township, N.J., will be closed and about 500 employees there are expected to lose their jobs, said Thomas Crane, a Honeywell spokesman.
General Electric, based in Fairfield, Conn., said the purchase will increase earnings per share by "double digits" in the first year after the transaction is completed, expected early next year. The acquisition is being accounted for as a pooling of interest, said Gary Sheffer, a General Electric spokesman.
Honeywell chief executive Michael Bonsignore and two other Honeywell officials will be added to General Electric's board.
General Electric still expects to name a new chairman before the year's end. Three internal candidates are presumed to be in the running to take over the chief executive post: GE medical systems chief Jeffrey Immelt, GE power systems head Robert Nardelli and GE aircraft engines leader James McNerney. The company had been expected to name one to Welch's post as soon as this month.
Shares of General Electric fell $1.81 to $50.44. They've risen 29 percent in the past year. Honeywell gained $4 to $50. They jumped 45 percent since speculation about a purchase began on Thursday.
General Electric is the world's largest maker of aircraft engines, power generation and medical-imaging equipment and one of the biggest makers of controls for running factories. The company will use the "GE-Honeywell" brand for some products.
Honeywell and United Technologies said late Thursday they were holding talks to combine. Welch learned of the talks before going to the Al Smith political dinner in New York City.
Welch faxed a handwritten note to Bonsignore the next morning as Honeywell's board was meeting to consider United Technologies' bid. United Technologies terminated its discussions with Honeywell when learning of the bid that afternoon.
"I told Mr. Bonsignore and Honeywell we would not get ourselves into a bidding war — it's just not good practice really," George David, chief executive of United Technologies, said in an interview. "It would have been a great deal."
United Technologies and Honeywell would have combined to be the world's largest aerospace-parts company, with about $52 billion in annual sales.
General Electric, the world's No. 1 jet-engine maker, competes with United Technologies's Pratt & Whitney unit. United Technologies, which also owns Hamilton Sundstrand aerospace systems and Sikorsky helicopters, could have used Honeywell businesses to offer planemakers a package that includes landing gear and navigational systems with the engines.
Now, GE Aircraft Engines, which doesn't offer as much equipment outside of engines to planemakers as United Technologies, could use the Honeywell businesses to compete while selling directly to planemakers Boeing Co. and Airbus Industrie.
General Electric will own 19.9 percent of Honeywell, among other concessions, if the acquisition isn't completed. Dennis Dammerman, a General Electric vice chairman and former chief financial officer, will lead the integration team.
Lawrence Bossidy, a former vice chairman of General Electric, engineered the purchase of the former Honeywell after improving performance at AlliedSignal. He retired as chairman of the combined Honeywell earlier this year.
Welch is a close friend of Bossidy's, who spent more than three decades at General Electric before leaving to run AlliedSignal.