GE to split aviation, health care and energy into 3 public companies

CNBC's David Faber joins 'Squawk Box' to report on General Electric's plan to spin its aviation, health care and energy businesses into three public companies. For access to live and exclusive video from CNBC subscribe to CNBC PRO: cnb.cx/2NGeIvi
U.S. industrial giant General Electric will split into three companies following years of seeing its stock underperform, the company announced on Tuesday.
The company will be divided into separate units focused on aviation, health care and energy. GE plans to spin off the health-care unit by early 2023 and the energy unit by early 2024, the company said in a news release.
GE shares, which are already up 55% over the last 12 months, jumped more than 4% in premarket trading
“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,” CEO Lawrence Culp said in a statement accompanying the announcement. “We are putting our technology expertise, leadership, and global reach to work to better serve our customers.”
The name GE will live on with the aviation company after the move is complete, and Culp will continue to lead that unit, the company said.
General Electric was co-founded in the late 1800s by Thomas Edison and went through several transformations over the last century as the U.S. economy changed, becoming a leader in appliances, jet engines and power turbines.
The conglomerate expanded rapidly in the 1980s under the late Jack Welch, getting into financial services and back into broadcasting with the purchase of NBC, sporting enviable earnings growth and returns for investors along the way.
GE spent periods as the largest company by market value as recently as the early-2000s, but then the financial crisis hit. Weighed down by its troubled financial arm, GE was never able to climb back on top under Welch’s successor Jeff Immelt. The stock was dumped from the Dow Jones industrial average in 2018 after being one of the original members of the blue chip average going back to 1896.
Culp, who previously ran Danaher, took over as CEO of GE in 2018. The company has spun off or sold several of its units under Culp as the executive has tried to simplify the conglomerate’s business structure.
“We’ve made a lot of progress, not only with with balance sheet but improving our core operations, over the last several years,” Culp said on a call with investors and analysts. “But I think as we’ve seen in so many instances outside of GE over the last decade, spinning good business heightens focus and accountability.”
Despite the recent outperformance, GE shares have badly underperformed the market over the last two decades. The stock has lost 2% annually since 2009, compared to a 9% annual return for the S&P 500, according to FactSet.
The decision by GE earned praise from Wall Street analysts on Tuesday morning.
“The move does add cost, but nimbleness of three focused companies will likely be viewed as an opportunity set to more than offset any new costs,” Wells Fargo analyst Joseph O’Dea said in a note to clients.
The company has been plagued by high levels of debt in recent years that have drawn skepticism on Wall Street. The capital structures of the new firms will be announced at a later date, GE said, and Culp added on a call with investors that the energy segment will have the least amount of debt.
The company said it will use proceeds from the recent sale of its aviation financing unit to pay down debt, with gross debt expected to total less than $65 billion by the end of 2021. The spinoffs will cause about $2 billion in transaction and operational costs, GE estimated.
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[@badluck5647]

Ever since Jack Donaghy of 30 Rock explained the corporate structure of GE, I knew the company eventually needed to split.

[@badluck5647]

Clip kzbin.info/www/bejne/fWGWg2acq7F8nqs

[@brienfoaboutanything9037]

Wikipedia about General Electric: kzbin.info/www/bejne/hYeZgpSZfLSBgtk

[@MikeYoungeasytravel]

Another casualty of the disastrous Six Sigma methodology. Remember friends don’t let friends use Six Sigma!

[@celestialfix]

GE managements fatal mistake was not moving aggressively to rationalize GE Capital…….when the 2008 Economic Crisis hit management should have completely eliminated the dividend until GEC was under control and much smaller. Sad the company is being broken up.

[@24theMoney]

Don't forget that massive reverse split they did recently.

[@samwalton4598]

Which company gets all of the debt?? Complicated!!

[@MargateFL33063]

This will be the end of GE.

[@medschoolvisual6954]

How does this affect or benefit GE stockholders?

[@medschoolvisual6954]

@Opressa Era my current understanding is the GE ticker stays with avionics, healthcare and power will have new tickers

[@FatherNSonInvesting]

Stock is FLYING on this news, market likes it at least

[@duffduck]

I'm in GE for their Haliade-X model of wind turbine, their Hydro power, and Aircraft engine manufacturing.

[@vernefits1953]

Wow what a move!! Larry is the man

[@brajeshsingh2391]

Imagine the day Amazon announces the demerger or spinoff (though I like the word spinoff more, Americans always find fancy words for normal processes) and splits into AWS and Amazon Marketplace and Amazon Media. The stock markets will go into tizzy. I wonder if Mr. Jeff Bezos is thinking of it.

[@manaoharsam4211]

Why does it take to so long to figure something out like this. Can you imagine how much focus you can now have.

[@samwalton4598]

LTC ? Is part of the aircraft leasing company? It still sounds like GE to me. The LTC business is the unknown or understated liability that GE has mumbled about for the last 10 years. So they stuck it with the business that they think can bail it out??!! If it was “not” a concern?? Why wouldn’t they spin it off as a stand alone? Well……….because they would have to ad about $10 billion in cash just cover future liabilities! As it smoulders on the balance sheet of the Aircraft leasing business everyone is standing by waiting for the nuclear waste to start oozing out and pollute the whole balance sheet!! At least there is a possibility they can restructure the aircraft leasing business in the future when LTC becomes a real problem. Wonder how WallStreet will sell that one to the pension managers(public money) in the future???

[@manaoharsam4211]

Boeing should do the same. Too big to manage. Boeing acquired so many companies time to split to atleast two or maybe three. One being space , commercial aviation, defense. Then they can concentrate on each separately. I think GE for example could be atleast Pratt and Whitney, and it's healthcare is worth a lot. Finally somebody was listening to me. I guess Americans are catching on.

[@loriann1506]

Is the appliances and electronics equipment under the energy department? Or is it the renewable energy company?

The appliances division was sold to a Chinese company a few years ago, they just kept using the GE logo for marketing purposes.

[@loriann1506]

@ thanks for confirming that . I thought I heard something about it. … .

[@loriann1506]

Who remains the parent company?

[@braddeyoung8701]

Aviation

[@loriann1506]

@adija just, why????? Why say that?

[@loriann1506]

@@braddeyoung8701 thanks

[@timwalter6795]

So Markopolos was substantially right?

[@braddeyoung8701]

No Markopolis said GE was going bankrupt. Splitting a company into 3 stand alone businesses is a world of difference than going bankrupt.

[@evergrandebestrealestate4854]

Dumb leaders that don't know how to run a company. GE is a legend. Useless leaders have destroyed it.

[@muradshawar]

How much debt will they spinoff ? None since when the spinoff happens in 2023 and 2024 the balance sheet will be super clean.

[@PK-uk3gh]

Long overdue...but still a looooong way to go to to clean up books...just a small step ...

[@jtropfenbaum7931]

Get bigger shirts !!🧐

[@danjohnston9037]

Windmills Are Good

[@katharinelafountain4916]

nice