Published: Thu, June 28, 2018
Medical | By Marta Holmes

General Electric breaks off healthcare to focus on power, aviation

General Electric breaks off healthcare to focus on power, aviation

The shares surged in early trading.

The moves will leave GE, once one of America's great conglomerates, focused on just aviation, power and renewable energy.

The proposed sale was though not entirely unexpected after Flannery disclosed earlier this year GE was considering "exit options" for Baker Hughes as part of a planned $20 billion divestment effort in a reversal of its formerly expansionist stance.

GE, an icon of American industry, has struggled to rebound from the financial crisis of 2008-2009. "We are aggressively driving forward as an aviation, power and renewable energy company-three highly complementary businesses poised for future growth".

Investors gave a thumbs-up.

GE shares jumped 7.8 percent, to $13.74, when the market closed Tuesday.

The moves were announced as GE disappeared from the Dow Jones industrial average, replaced by a drugstore chain.

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Analysts have since weighed in on GE's moves.

"Today marks an important milestone in GE's history". After that, the company "expects to adjust the GE dividend with a target dividend policy in line with industrial peers". Investors have been bracing for a possible cut as GE's condition has deteriorated.

A note from JPMorgan Chase predicted GE would cut its dividend following the health care transaction.

Flannery has said he wants to see margins improve at GE-RE. Culp, a former Danaher Corp.

Flannery's latest moves cap a strategic review he has been pursuing since taking the helm previous year from Jeffrey Immelt, while effectively marking his second attempt to present a turnaround to investors.

All of this comes as part of a bid to right the ship at GE, which had lost more than $100bn of market value over the past year as its share price plummeted.

This after saying it would sell its distributed power business to the private equity firm Advent International for $3.25 billion on Monday. Immelt sold most of GE's banking and consumer operations.

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The strategy also includes the spin-off of GE Healthcare into a standalone company, by generating cash from the sale of some 20 percent of GE Healthcare and distributing the remaining 80 percent to GE shareholders through a tax-free distribution.

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.

The news came as a shock throughout the radiology business, where an adage among purchasing managers once claimed "You'll never get fired for buying GE" - a testament to the company's reputation and staying power.

GE plans to "materially shrink" the balance sheet of its finance arm, GE Capital, aiming to sell US$25 billion in energy and industrial finance assets by 2020. Boston-based GE will eventually exit its oil and gas business, formed just a year ago through a merger with Baker Hughes. His plan calls for separating the health care and oil businesses, and shrinking the company's headquarters. With demand down sharply, the division has weighed on GE's financial results.

The U.S. Securities and Exchange Commission began investigating GE's accounting practices in January after it posted a $9.8 billion loss in the last quarter of 2017.

That didn't last long.

Bloomberg's Brandon Kochkodin, Cecile Daurat, Scott Deveau and Phil Serafino contributed.

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