GE plans to divest its 62.5-percent stake in oilfield services provider Baker Hughes over the next two to three years, as part of a plan unveiled on Tuesday to reduce debt and focus on aviation, power, and renewables.
In addition to the healthcare-related news, GE said it will sell its stake in Baker Hughes, an oil company. The company also announced actions to strengthen its balance sheet, outlining "a clear path" to reducing its net debt by approximately US$25Bn and "further de-risking" GE Capital, its financial services division.
"Today marks an important milestone in GE's history", CEO John Flannery said in a statement.
"GE Healthcare will continue to significantly invest in core digital solutions, such as smart diagnostics, connected devices, AI and enterprise imaging", Kieran Murphy, president and CEO of GE Healthcare, said at the time. However, it will still be a powerhouse by most measures: The three main groups that will remain - power, aviation, renewable energy - together generate more than $70 billion in sales a year. He pledged to continue to make GE "simpler and stronger" while cleaning up its bloated balance sheet.
Investors had grown increasingly concerned with a range of issues - from the complexity of GE's sprawling operations and accounting practices, to the recent struggles of its Power unit, to unforeseen healthcare costs at a legacy insurance business. All told, GE expects to deliver another $500m of corporate savings by 2020 as it moves towards a "much smaller" corporate headquarters in Boston.
GE has since largely divested GE Capital, but lingering liabilities forced it to take a $6.2 billion charge previous year, and begin setting aside $15 billion more in reserves against insurance claims. Finally, Van ECK Associates Corp raised its position in shares of Baker Hughes A GE by 15.2% in the first quarter.
The spinoff decision could offer an opportunity for the separate entity to funnel its energy into the most promising areas in which GE Healthcare now operates, Haller said.
S&P Global Ratings responded to the news by placing GE's "A" long-term rating on CreditWatch with "negative implications".
GE Healthcare recorded more than $19 billion in revenues in 2017 and posted 5 percent revenue growth and 9 percent segment profit growth in the same year.
GE has made a decision to ditch its stake in USA oilfield services contractor Baker Hughes just a year after completing the takeover transaction.
In related news, insider William D. Marsh sold 6,543 shares of the stock in a transaction on Tuesday, May 1st.
Analyst firm Cowen stated in a note the divestment of Baker Hughes could mirror that of GE's healthcare unit, of which 20% will be sold off and the remaining 80% spun off to shareholders.
Flannery said that separating GE Healthcare and BHGE will allow them to invest in innovation and pursue their own growth strategies.
"GE Healthcare's vision is to drive more individualized, precise, and effective patient outcomes", he said.
The news comes a day after GE agreed to sell its distributed power unit for $3.25 billion to USA buyout group Advent.
GE said Larry Culp would take over as lead director. A major acquisition occurred in 2003 with a $9.5 billion purchase of United Kingdom life sciences and contrast media company Amersham, a move that brought GE into the pharmaceutical business.
The healthcare spinoff will be completed in the next 12-18 months, GE said in an announcement on Tuesday.