General Electric surges after announcing another spinoff as it leaves the Dow

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  • General Electric said Monday it will exit its majority stake in Baker Hughes, an oilfield services company, over the next two to three years. It will also spin out GE Healthcare as a standalone company.
  • On Monday, GE said it would sell its distributed power business to a private equity firm for $US3.25 billion.
  • The moves come as new CEO John Flannery approaches his anniversary at the company’s helm, where he has set out sweeping cost-cutting and debt-reduction goals.
  • Follow GE’s stock price in real-time here.

General Electric has found a way to tell investors some good news as it leaves one of the most famous stock indexes in the world.

Shares of the once-sprawling industrial behemoth surged as much as 6% in early trading Tuesday after it said it would sell off its majority stake in oil services company Baker Hughes over the next two to three years. It also announced a healthcare spinoff on Tuesday.

This after saying it would sell its distributed power business to the private equity firm Advent International for $US3.25 billion on Monday.

This leaves the original Dow component with only its renewable energy, jet engines and renewable energy as it leaves the industrial index on Tuesday to be replaced by Walgreens Boots Alliance.

The slimming down of the company comes almost precisely on the one-year anniversary of GE’s completion of an acquisition of a 62.5% stake in Baker-Hughes. CEO John Flannery – who took over the company in August 2017- has focused on cost-cutting to reduce GE’s debt to $US25 billion by 2020.

“Today marks an important milestone in GE’s history. 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,” Flannery said in a press release.

GE’s stock price has declined by more than three-quarters from its high in September 2000. It’s currently trading at $US13.44, down 25% since the beginning of 2018. Wall Street analysts polled by Bloomberg think the stock has some life left, giving it an average price target of $US16, roughly 20% above Tuesday’s prices.

Baker Hughes reported $US3.21 billion profit in 2017.

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