General Electric (GE) has announced plans to spin off GE Healthcare, its healthcare business, as a stand-alone company, following results from a strategic review. The plan is part of a larger reorganization and strategic alignment of the company. Going forward, GE says it will focus on aviation, power, and renewable energy. GE’s board of directors have unanimously approved the plan.

GE Healthcare recorded over $19 billion in revenues in 2017 and posted 5% revenue growth and 9% segment profit growth in the same year. The business provides medical imaging (including contrast agents), monitoring, biomanufacturing, and cell-therapy technology.

GE expects to generate cash from the disposition of approximately 20% of its interest in the healthcare business and says it plans to distribute the remaining 80% to GE shareholders through a tax-free distribution. GE says the structure, sequence, and timing of these transactions will be determined and announced at a later date but are expected to be completed over the next 12 to 18 months.

“GE Healthcare’s vision is to drive more individualized, precise and effective patient outcomes,” said Kieran Murphy, President and CEO of GE Healthcare, in a June 26, 2018 company statement, who will continue to lead GE Healthcare as a stand-alone company. “As an independent global healthcare business, we will have greater flexibility to pursue future growth opportunities, react quickly to changes in the industry and invest in innovation. We will build on strong customer demand for integrated precision health solutions and great technology with digital and analytics capabilities as we enter our next chapter.” 

Following its strategic review, GE said it plans to pursue separation from Baker Hughes (BHGE), a GE oil and gas company, over the next two to three years, make its corporate structure leaner, and substantially reduce debt. “Today’s [June 26, 2018] actions unlock both a pure-play healthcare company and a tier-one oil and gas servicing and equipment player,” John Flannery, Chairman and Chief Executive Officer of GE, said in the June 26, 2018 company statement. “We are confident that positioning GE Healthcare and BHGE outside of GE’s current structure is best not only for GE and its owners, but also for these businesses, which will strengthen their market-leading positions and enhance their ability to invest for the future, while carrying the spirit of GE forward.”

These announcements follow a series of changes GE has made in the past year and is part of a larger reorganization of the company. The changes include announced sales of GE’s Distributed Power, Industrial Solutions, and Value-Based Care Divisions as well as a pending combination of GE’s Transportation business with Wabtec, a US rail equipment manufacturer.

The company says its new GE operating system will result in a smaller corporate headquarters focused primarily on strategy, capital allocation, talent, and governance with the goal of generating at least $500 million in corporate savings by the end of 2020. Under the new GE operating system, most resources and services traditionally held at the headquarters level will be realigned to the businesses.

Source: GE