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GE To Shed Its Baker Hughes Stake, Health Care Business

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GE To Shed Its Baker Hughes Stake, Health Care Business

General Electric Company (NYSE: GE) plans to divest its 62.5-percent stake in Baker Hughes, spin off GE Healthcare and reduce its industrial net debt over the next 18 months by about $25 billion, according to a Tuesday SEC filing.

Why It’s Important

GE Healthcare recorded $19.11 billion and Baker Hughes $17.23 billion in sales last year. The former comprised more than 15 percent of GE’s total revenue.

Although seen to bolster the balance sheet by reducing debt, amassing cash and diminishing GE Capital, the move ultimately leaves GE with just its power plant, renewable energy and jet engine businesses, only the latter of which has demonstrated high profitability.

The decision, in response to a 54-percent year-over-year fade in the stock, follows a year-long strategic review also driving the $3.25 billion sale of GE’s distributed power segment and intended sale of its transportation business.

What’s Next

GE will surrender its Baker Hughes stake throughout the next two to three years, and GE Healthcare will become a standalone company over the next 12 to 18 months.

About 80 percent of the GE Healthcare value will be given to shareholders in a tax-free distribution.

At time of publication, shares were set to open up 5.7 percent at $13.47.

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Image credit: Momoneymoproblemz (Own work) [CC BY-SA 3.0], via Wikimedia Commons

 

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