GE Healthcare to become standalone company
GE plans to fully separate Baker Hughes
GE (GE) announced the results of its strategic review.
GE will focus on Aviation, Power and Renewable Energy, creating a simpler, stronger, leading high-tech Industrial company.
In addition to the pending combination of its Transportation business with Wabtec, GE plans to separate GE Healthcare into a standalone company, pursue an orderly separation from BHGE (BHGE) over the next two to three years, make its corporate structure leaner and substantially reduce debt.
GE’s Board of Directors unanimously approved the plans announced today.
GE is making fundamental changes to how it will run the company.
The new GE Operating System will result in a smaller corporate headquarters focused primarily on strategy, capital allocation, talent and governance.
It will result in better execution, increased speed and is expected to generate 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. GE is targeting an Industrial net debt-to-EBITDA ratio of less than 2.5 times and a long-term A credit rating.
GE also plans to reduce Industrial net debt by approximately $25 billion by 2020 and maintain more than $15 billion of cash on the balance sheet.
GE expects to maintain its current quarterly dividend, subject to Board approval, until GE Healthcare is established as an independent entity.
At that time, the new GE Healthcare Board of Directors will determine GE Healthcare’s dividend policy, which GE expects to reflect healthcare industry practices.
Also at that time, the GE Board expects to adjust the GE dividend with a target dividend policy in line with industrial peers. Kieran Murphy, president and CEO of GE Healthcare, will continue to lead GE Healthcare as a standalone company, maintaining the GE brand.
GE expects to generate cash from the disposition of approximately 20% of its interest in the Healthcare business and to distribute the remaining 80% to GE shareholders through a tax-free distribution.
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 will conduct business as usual throughout this process, continuing to serve its partners and customers.
GE plans to fully separate its 62.5% interest in BHGE in an orderly manner over the next two to three years. BHGE’s full stream offering brings together equipment, services and digital solutions to help its customers be more productive-a unique and powerful value proposition in a changing market.
The separation will provide BHGE with enhanced agility and the ability to focus on leading in the oil and gas industry.
Shares of the former DJIA component closed at $12.75.
To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.
This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.