GE will spin off its healthcare business and split from oil giant Baker Hughes in a massive reorganization

General Electric
  • General Electric will spin off its healthcare business and divest its stake in oil-services company Baker Hughes, it said in a statement on Tuesday.
  • The moves come as part of a broad corporate reorganization that sees GE trying to shore up its balance sheet and streamline its businesses.

General Electric said on Tuesday that it will spin off its healthcare business and divest its stake in oil-services company Baker Hughes as part of a sweeping corporation reorganization.

The company is making these moves in order to focus on aviation, power, and renewable energy, according to a statement. The announcement comes on the heels of a lengthy managerial review conducted by GE management, including newly appointed chief executive officer John Flannery.

As part of its healthcare spin-off, GE expects to monetise 20% of the existing business, then distribute the remaining 80% to shareholders. Meanwhile, the announcement of a divestiture of the company’s 62.5% stake in Baker Hughes comes just 18 months after the investment was initially announced.

GE is betting that these sweeping changes will strengthen its balance sheet. Tuesday’s moves clear the path for the company to reduce debt by $US25 billion, and allow it more flexibility in terms of de-risking in the future, the release said.

“Today marks an important milestone in GE’s history,” Flannery said in a statement. “We are aggressively driving forward as an aviation, power and renewable energy company – three highly complementary businesses poised for future growth. We will continue to improve our operations and balance sheet as we make GE simpler and stronger.”

GE’s latest actions highlight its newfound commitment to streamlining operations and cutting areas deemed nonessential to the company’s operations. It’s a major shift from the GE conglomerate of old, which contained a broad collection of disparate businesses.

The two major shake-ups also mark a direct challenge to the legacy of former CEO Jeff Immelt, who was a major proponent of GE Healthcare during its creation, and whose deal for Baker Hughes was one of his final corporate achievements.

GE, which is down 27% year-to-date, climbed 6% in pre-market trading.

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