General Electric (GE) to split into 3 companies

Conglomerate to split into separate aviation, health and energy companies

General Electric (GE)  announced on Tuesday its intention to split into three separate companies, marking a profound shift for the conglomerate.

With co-founders  including Thomas Edison and JP Morgan, GE was one of the original 12 firms listed on the Dow Jones Industrial Average (DJIA). 

The company now plans to spin off its healthcare unit by early 2023 and its energy unit by 2024. The remaining entity will focus on aviation. 

Outsider CEO continues to disrupt

Lawrence Culp, who took over as chair and CEO in 2018, stated: “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. We are putting our technology expertise, leadership, and global reach to work to better serve our customers.”

Having lost its position as the largest company in the world by market capitalisation following the 2008 financial crisis, General Electric struggled to even remain on the DJIA, eventually being dropped three years ago. 

Culp, the first outsider to be appointed in the company’s history, has already spun off a slew of ventures since taking the helm. Talking to investors and analysts on a call, he said: “We’ve made a lot of progress, not only with the balance sheet but improving our core operations, over the last several years. 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.”

Each of the three companies that emerge from the breakup will have their own board of directors. GE plans to keep a stake in the healthcare firm of around 20%, with Culp remaining as non-executive chair. 

Activist investor welcomes announcement

Trian Fund Management, an activist hedge fund and GE stakeholder which had lobbied for radical improvements to efficiency within the company, hailed the move, stating: “The strategic rationale is clear: three well-capitalized, industry leading public companies, each with deeper operational focus and accountability, greater strategic flexibility and tailored capital allocation decisions. We salute GE CEO Larry Culp and his team’s efforts in driving long-term shareholder value.”

By 11:30 (EDT), General Electric traded up by 4.3% at $113.10, up 35% since the start of the year. 

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