GE Healthcare will be spun off from General Electric (GE) within the next 12 to 18 months. It will likely be based in Chicago, where its global headquarters are located.
GE Healthcare will be spun off from General Electric (GE) within the next 12 to 18 months. It will likely be based in Chicago, where its global headquarters are located.
The spinoff is part of the company’s strategic review, which is likely to involve splitting off some of the behemoth’s other companies. GE also announced it was splitting its 62 percent stake in Baker Hughes, an energy services company based in Houston. It also announced it sold its industrial engines division to Advent International, a private equity firm, for $3.25 billion.
GE Healthcare offers medical imaging, monitoring, biomanufacturing and cell therapy technology. The company has much of its research-and-development activities, and sales and manufacturing operations in the metropolitan Milwaukee area. It employs about 6,000 people in southeast Wisconsin, and 54,000 worldwide. Its largest campus is in Waukesha, as well as a big office at Milwaukee County Research Park in Wauwatosa, West Milwaukee and Oak Creek. It also has a facility in Madison, Wisconsin.
In a statement, GE Healthcare’s Kieran Murphy said, “GE Healthcare’s vision is to drive more individualized, precise and effective patient outcomes. As an independent global healthcare business, we will have greater flexibility to pursue future growth opportunities, react quickly to changes in the industry and invest in innovation. We will build on strong customer demand for integrated precision health solutions and great technology with digital and analytics capabilities as we enter our next chapter.”
In a November 2017 announcement preceding the restructuring announcement, GE chief executive officer John Flannery announced that GE would focus on power, aviation and healthcare, and divest units such as lighting and transportation. But in April, GE spun out part of its healthcare business, selling its Value-Based Division for $1.05 billion to Veritas Capital, a private equity firm.
The company also is spinning off its train manufacturing business and selling its distributed power division for $3.3 billion. The Financial Times writes, “The divisions being spun off under the plan unveiled on Tuesday accounted for 30 percent of the group’s revenue and 25 percent of its industrial segment profit last year. The decision marks a further shift away from GE’s broad conglomerate structure, which under chief executive Jack Welch in the 1980s and 1990s included businesses as diverse as insurance, entertainment and plastics.”
GE was also removed from the Dow Jones Industrial Average stock index. It is being replaced by Walgreens Boots Alliance. It has been on the index since 1907.
In a statement today, Flannery said, “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. We are confident that positioning GE Healthcare and BHGE outside of GE’s current structure is best not only for GE and its owners, but also for these businesses, which will strengthen their market-leading positions and enhance their ability to invest for the future, while carrying the spirit of GE forward.”
GE shares rose 5.5 percent in early trading at the news. However, the shares are down 27 percent this year prior to the rise, and has been down by 54 percent over the last year.
Part of the restructuring is to cut its net debt by about $25 billion by 2020 and create $500 million or more in cost savings by the end of 2020.