In a last-ditch effort to simplify its business, pare down debt and breathe life into a battered share price, General Electric (GE) announced on Tuesday it would split into three public companies, marking the end of the 129-year-old conglomerate that was once a global symbol of American business power.
After the split, GE will become an aviation company.
The shares of Boston-based GE, ranked in 2020 among the Fortune 500 as the 33rd largest firm in the US by gross revenue, reached an over 3-year high going up 2,6% in morning trade, soon after the news emerged, and closed at $111.29, but went through a 0.35% drop in the broader S&P 500 (.SPX) index.
GE’s shares have increased by 55% over the last 12 months, gaining about 9% since July 30 when the company reduced the number of its traded shares.
The company’s CEO H. Lawrence Culp, an outsider brought in as chief executive three years ago, described the planned breakup as a defining moment for the conglomerate and the crown of his effort to remake it as “stronger, high-tech industrial company.”
Culp said that each of the newly created global public companies can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees.
The three businesses that will combine and spin off the business in early 2024 – GE Renewable Energy, GE Power, and GE Digital – would focus on energy, healthcare and aviation. General Electric also plans to separate in early 2023 the healthcare company, in which it expects to retain a stake of 19.9%.
Since he took GE’s reins in 2018to simplify the company’s business, Culp has focused on reducing debt and improving cash flows by streamlining operations, cutting overhead costs and faster collections from customers, which had led to improved balance sheet and put the company back on track to reduce its debt by more than $75 billion by the end of 2021.
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