Cree shares rise on GE buyout rumors

Shares in LED maker Cree rose sharply as rumors circulated that General Electric might be poised to make a bid.

LED maker Cree saw its share price rise by nearly 10% on Friday August 31 after a story on Bloomberg News said that the company could be bought by General Electric.

There is no evidence to suggest the rumors are true. "This rumor comes up again every couple of quarters," Raymond James & Associates analyst Hans Mosesmann told Bloomberg. "It's not going to happen."

The origin of the rumors might be linked with the completion of Philips' acquisition of Color Kinetics, which provides Philips with a strong presence throughout the solid-state lighting industry supply chain. GE has an LED lighting business, Lumination, but lacks an in-house capability to manufacture LEDs, unlike both Osram and Philips (which owns Lumileds).

Buying Cree would complete GE's capabilities. However, GE already has a strong relationship with Nichia, the world's largest LED maker (see GE takes full control of GELcore, teams with Nichia.

Cree, with a market capitalization of around $2.25 billion and LED sales of $92 million in the quarter ended June 24, 2007, lacks a strong relationship with a major lighting manufacturer.

In any case, this would be an expensive time for GE to buy Cree even though the company has just divested its plastics division for $11.6 billion. Cree's shares have risen from around $15 at the end of January 2007, to Friday's close of $26.60.

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