GE Plans To Divest Its Healthcare Unit, Separate Baker Hughes

(RTTNews) - General Electric Co. (GE) said that it plans to separate GE Healthcare as a standalone company, separate Baker Hughes, a GE company, over time, reduce debt, further reduce the size of GE Capital's balance sheet and introduce a leaner corporate structure. GE will focus on Aviation, Power and Renewable Energy. GE also announced that the independent members of the Board of Directors have elected H. Lawrence Culp, Jr. as lead director, effective June 26, 2018.

"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 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," General Electric said.

John Flannery, chairman and CEO of GE, 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."

GE noted that it will continue to invest for the future and lead in innovative technologies like additive manufacturing and digital to lead the next wave of industrial productivity.

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 noted that it plans to fully separate its 62.5% interest in Baker Hughes, a GE company, or 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.

GE continues to work to make GE Capital smaller and more focused on supporting its core industrial businesses. The company intends to materially shrink the balance sheet of GE Capital targeting sales of $25 billion in energy and industrial finance assets by 2020. The company is assuming an approximately $3 billion capital contribution to GE Capital in 2019. In addition, the company is actively exploring options to reduce its insurance exposure.

GE also announced that the Board's independent directors have completed the previously announced lead director transition, electing Larry Culp, former CEO of Danaher, to succeed Jack Brennan, who is completing his last term on the Board. The change is effective today. Mr. Culp will also chair the Board's Management Development and Compensation Committee. He joined the GE Board as an independent director earlier this year.