General Electric Is Rising On Plans To Spin-Off Healthcare Unit (ALLISS)

GE to spin off GE Healthcare into standalone company

The future company will narrow its focus to power, renewable energy and jet engines, GE said in a statement Tuesday. In addition to the pending combination of its Transportation business with Wabtec, GE plans to separate GE Healthcare into a standalone company and pursue a separation from BHGE over the next two to three years.

The company said it will be able to reduce its debt by $25 billion and remove additional risk as it reimagines itself as something very different from the multinational conglomerate it was before the Great Recession.

The move would be the conclusion of a mission CEO John Flannery was given previous year to reshape the company.

"Today marks an important milestone in GE's history". However, it will still be a powerhouse by most measures: The three main groups that will remain - power, aviation, renewable energy - together generate more than $70 billion in sales a year.

"Today's actions unlock both a pure-play healthcare company and a tier-one oil and gas servicing and equipment player", Flannery said. While that makes GE Healthcare a big business in its own right, the unit's leaders think the organization will be nimbler once freed from the broader GE structure.

In April, medical equipment maker Danaher Corp approached GE about potentially acquiring the life sciences division of its healthcare unit, a major source of sales that makes X-ray machines and hospital equipment, according to a person familiar with the matter.

"We've changed many things, but the essence of GE endures", he said. Assuming investors assign a similar multiple to GE Healthcare, back of the envelope math suggests a valuation for the business in the neighborhood of $60 billion to $70 billion.

The Baker Hughes, a GE company has the market capitalization of $37.79B. Although the oil-services industry has come under pressure from falling commodity prices, GE sees potential in the business from cost cuts and growing customer relationships, they said. S&P Global Ratings placed the company on credit watch negative for a possible downgrade.

GE's slow-and-steady divestiture plan tracks the approach it has taken under Flannery who took the helm last August.

GE Healthcare president and CEO Kieran Murphy will stay in his role, leading the spinoff. "We are focused on executing the strategy and implementing the structure we've laid out today to position our businesses for future growth". The next 5 year EPS growth rate of Baker Hughes, a GE company (NYSE:BHGE) is predicted at 0% while Crown Castle International Corporation (NYSE:CCI) stands at 19.83%.

GE has chose to ditch its stake in United States oilfield services contractor Baker Hughes just a year after completing the takeover transaction. Also, insider William D. Marsh sold 6,543 shares of the business's stock in a transaction that occurred on Tuesday, May 1st.

Under the plan unveiled Tuesday, GE will sell 20 percent of the health business and spin off the rest to its shareholders tax-free.

The decision to divest does not mean GE dislikes the businesses, he said. It's always been one of the more obvious misfits in GE's portfolio; there's really no reason that MRI machines have to be sold by a company that also purveys jet engines, especially now that the "GE store" of shared technology and resources has been shown to be not all it was cracked up to be.

It's a bit jarring that the parent company is pumping US$3 billion into GE Capital after management previously said it wouldn't need to do so.

The healthcare spinoff is expected to be completed over the next 12 to 18 months.

Seaport Global Securities analyst Sonny Randhawa said GE would probably divest its interest, now valued at $31 billion, through share sales rather than a corporate buyout.

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