General Electric to form three public companies
GE announced its plan to form three industry-leading, global public companies focused on the growth sectors of aviation, healthcare, and energy, by: Pursuing a tax-free spin-off of GE Healthcare, creating a pure-play company at the center of precision health in early 2023, in which GE expects to retain a stake of 19.9 percent; and Combining GE Renewable Energy, GE Power, and GE Digital into one business, positioned to lead the energy transition, and then pursuing a tax-free spin-off of this business in early 2024.
Following these transactions, GE will be an aviation-focused company shaping the future of flight.
As independently run companies, the businesses will be better positioned to deliver long-term growth and create value for customers, investors, and employees, with each benefitting from: Deeper operational focus, accountability, and agility to meet customer needs; Tailored capital allocation decisions in line with distinct strategies and industry-specific dynamics; Strategic and financial flexibility to pursue growth opportunities; Dedicated boards of directors with deep domain expertise; Business- and industry-oriented career opportunities and incentives for employees; and Distinct and compelling investment profiles appealing to broader, deeper investor bases.
GE Chairman and CEO H. Lawrence Culp, Jr. said, “At GE we have always taken immense pride in our purpose of building a world that works. The world demands-and deserves-we bring our best to solve the biggest challenges in flight, healthcare, and energy.
By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees. We are putting our technology expertise, leadership, and global reach to work to better serve our customers.”
Culp will serve as non-executive chairman of the GE healthcare company upon its spin-off.
He will continue to serve as chairman and CEO of GE until the second spin-off, at which point, he will lead the GE aviation-focused company going forward.
Peter Arduini will assume the role of president and CEO of GE Healthcare effective January 1, 2022.
Scott Strazik will be the CEO of the combined Renewable Energy, Power, and Digital business while John Slattery continues as CEO of Aviation.
GE intends to execute the spin-offs of Healthcare in early 2023 and of the Renewable Energy and Power business in early 2024.
The respective capital structures, brands, and leadership teams for each independent company will be determined and announced later.
Where required to do so, GE will consult with employee representatives in line with its legal obligations before any final decisions are taken.
Through the transition, GE will be able to monetize its stakes in AerCap and Baker Hughes, prioritizing further debt reduction.
Each of the three resulting independent companies will be well capitalized with investment-grade ratings.
Following the spin-off transactions, GE will retain other assets and liabilities of GE today, including run-off insurance operations.
Upon closing the Healthcare transaction, GE expects to retain a stake of 19.9 percent in the healthcare company to provide capital allocation flexibility.
GE also intends that Healthcare will issue debt securities, the proceeds of which will be used to pay down outstanding GE debt.
The transactions are not subject to bondholder consent.
The company expects to incur one-time separation, transition, and operational costs of approximately $2 billion and tax costs of less than $0.5 billion, which will depend on specifics of the transaction.
The proposed spin-offs of Healthcare and the Renewable Energy and Power business are intended to be tax-free for GE and GE shareholders for U.S. federal income tax purposes.
The transactions are subject to the satisfaction of customary conditions, including final approvals by GE’s Board of Directors, private letter rulings from the Internal Revenue Service and/or tax opinions from counsel, the filing and effectiveness of Form 10 registration statements with the U.S. Securities and Exchange Commission, and satisfactory completion of financing.
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