GE, a pioneering industrial conglomerate, will separate
Nov. 9 (Reuters) – General Electric (GE.N) on Tuesday said it would split into three state-owned companies as the U.S. industrial conglomerate seeks to streamline operations, reduce debt and revive a course of l action beaten.
The split marks the end of the 129-year-old conglomerate that was once America’s most valuable company and a global symbol of American trading power. GE shares jumped 7% early in the session, hitting a nearly 3.5-year high.
GE has faced investor skepticism about its ability to turn a corner since the 2008 financial crisis, while battling rising debt. The company was also removed from the Dow Jones Industrial Average in 2018 after years of sliding valuation.
GE’s 2020 revenue was $ 79.62 billion, a far cry from the $ 180 billion in 2008 revenue.
In 2015, activist investor Nelson Peltz took a stake in GE and demanded changes within the company, including a shift from financial operations to its industrial roots.
The company’s shares, however, continued to underperform and were seen as having prompted former CEO Jeff Immelt to leave.
Larry Culp, who became the company’s first outside CEO in 2018, has been tasked with increasing cash flow and reducing debt.
The company has since split or sold several of its businesses in an attempt to rationalize its bewildering structure.
Boston-based GE said the three companies would focus on energy, health and aviation. It will combine GE Renewable Energy, GE Power and GE Digital and will divest the company in early 2024.
GE will also part with the healthcare company, in which it plans to retain a 19.9% stake, in early 2023.
In an interview with Reuters, CEO Larry Culp said he did not expect the split to face regulatory or labor issues and that there was no pressure from investors behind the decision. of split.
After the split, it will become an aviation company, which will be headed by Culp, who took over the reins of the conglomerate in 2018.
“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,” Culp said. in a press release.
The company expects to take a one-time charge of $ 2 billion related to separation and operating costs and tax costs of less than $ 500 million.
Scott Strazik will lead the combined renewable energy, power and digital businesses and Peter Arduini will lead GE Healthcare, the company said in a statement.
The company also plans to reduce its debt by more than $ 75 billion by the end of 2021, compared to 2018.
Report by Abhijith Ganapavaram in Bengaluru; written by Sweta Singh; Editing by Anil D’Silva and Nick Zieminski
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