GE to split into three companies to simplify business
GE has announced its plan to form three industry-leading, global public companies focused on the growth sectors of aviation, healthcare, and energy.
It plans to do this by:
• Pursuing a tax-free spin-off of GE Healthcare, creating a pure-play company at the centre of precision health in early 2023, in which GE expects to retain a stake of 19.9 percent; and
• Combining GE Renewable Energy, GE Power, and GE Digital into one business, positioned to lead the energy transition, and then pursuing a tax-free spin-off of this business in early 2024.
• Following these transactions, GE will be an aviation-focused company shaping the future of flight.
As independently run companies, the businesses will be better positioned to deliver long-term growth and create value for customers, investors, and employees, with each benefitting from:
• Deeper operational focus, accountability, and agility to meet customer needs;
• Tailored capital allocation decisions in line with distinct strategies and industry-specific dynamics;
• Strategic and financial flexibility to pursue growth opportunities;
• Dedicated boards of directors with deep domain expertise;
• Business- and industry-oriented career opportunities and incentives for employees; and
• Distinct and compelling investment profiles appealing to broader, deeper investor bases.
GE Chairman and CEO H. Lawrence Culp, Jr. said: “By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees. We are putting our technology expertise, leadership, and global reach to work to better serve our customers.”
“We remain focused on continuing to reduce debt, improve our operational performance, and strategically deploy capital to drive sustainable, profitable growth. We have a responsibility to move with speed to shape the future of flight, deliver precision health, and lead the energy transition. The momentum we have built puts us in a position of strength to take this exciting next step in GE’s transformation and realize the full potential of each of our businesses.”
In today’s portfolio of businesses, GE is on track to reduce debt by more than $75 billion by the end of 2021 and is now on track to bring its net-debt-to-EBITDA ratio to less than 2.5x in 2023. GE will also continue to drive operating improvements for sustainable profitable growth, and the company now expects to achieve high-single-digit free cash flow margins in 2023.
As a result, GE is in a strong position to execute this plan to form three well-capitalized, investment-grade companies. The company and its businesses will continue to serve GE’s partners and customers throughout this transition, according to a GE statement.
Culp will serve as non-executive chairman of the GE healthcare company upon its spin-off. He will continue to serve as chairman and CEO of GE until the second spin-off, at which point, he will lead the GE aviation-focused company going forward.
Peter Arduini will assume the role of president and CEO of GE Healthcare effective January 1, 2022. Scott Strazik will be the CEO of the combined Renewable Energy, Power, and Digital business while John Slattery continues as CEO of Aviation.
GE intends to execute the spin-offs of Healthcare in early 2023 and of the Renewable Energy and Power business in early 2024. The respective capital structures, brands, and leadership teams for each independent company will be determined and announced later, the statement said.
Through the transition, GE will be able to monetize its stakes in AerCap and Baker Hughes, prioritizing further debt reduction. Each of the three resulting independent companies will be well capitalized with investment-grade ratings.
Following the spin-off transactions, GE will retain other assets and liabilities of GE today, including run-off insurance operations. Upon closing the Healthcare transaction, GE expects to retain a stake of 19.9 percent in the healthcare company to provide capital allocation flexibility. GE also intends that Healthcare will issue debt securities, the proceeds of which will be used to pay down outstanding GE debt. The transactions are not subject to bondholder consent.
The company expects to incur one-time separation, transition, and operational costs of approximately $2 billion and tax costs of less than $0.5 billion, which will depend on specifics of the transaction. – TradeArabia News Service
Source: http://www.tradearabia.com/news/IND_389436.html
