GE to spin off healthcare unit and divest Baker Hughes stake
Company will narrow its focus to power, renewable energy and jet engines
Portable X-ray machines made by GE Healthcare, which is to be spun off.
General Electric will exit the healthcare and oil markets as chief executive John Flannery takes the most dramatic steps yet to pull the fallen corporate titan from a deepening crisis.
The future company will narrow its focus to power, renewable energy and jet engines, GE said in a statement Tuesday. It will spin off its medical-equipment business and sell its majority stake in oilfield supplier Baker Hughes.
The company’s shares surged in early trading.
The changes will profoundly reshape an icon of American business, which is mired in one of the worst slumps in its 126-year history amid flagging demand for industrial equipment, weak cash generation and an accounting investigation by US regulators.
“We are making fundamental changes to position our businesses for the future and redefine GE for another century for success,” Mr Flannery said on a conference call with investors and analysts. “This is a GE that’s equipped to fight for the future.”
Investors gave a thumbs-up. The shares jumped 7.4 per cent to $13.69 at 10:02am in New York after climbing as much as 8 per cent for the biggest intraday gain in three years. GE fell 27 per cent this year through Monday, following a 45 per cent decline last year – a slump that led overseers of the Dow Jones Industrial Average to kick GE out of the stock gauge it had been in for more than 100 years.
GE plans to reduce net debt by about $25 billion by 2020.
The latest news is a day after GE agreed to sell its distributed power unit for $3.25 billion to US buyout group Advent. GE also has announced plans to shed its transportation unit, which makes railroad locomotives.
GE’s healthcare unit makes diagnostic imaging systems such as X-ray and magnetic resonance and clinical systems, including ultrasound. The business had $19.11 billion in revenue in 2017, representing more than 15 per cent of the company’s annual sales.
GE bought Baker Hughes in July, 2017 and combined it with its oil and gas equipment and services operations to create a new company in which GE holds a stake of about 62.5 per cent. The unit reported sales of $17.23 billion in 2017. – Bloomberg