General Electric, the U.S. industrial giant, has said it will split into three companies following years of the financial crisis.
In a statement, the company said it will be divided into units focused on aviation, healthcare and energy. The company intends to retain a 19.9 per cent stake in the healthcare unit, which it plans to launch in 2023.
GE Renewable Energy, GE Power and GE Digital will be combined into an energy unit, which is scheduled to be launched in 2024, while the original GE will focus on aviation. The group said all three new companies would have an investment-grade credit rating.
GE shares, which were already up 55 per cent over the last 12 months, rose more than 10 per cent in pre-market trading as investors welcomed the decision.
In a statement, CEO Lawrence Culp said, “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.”
Created by Jack Welch at the end of the last century, the group became the world’s largest company, lauded for its managerial efficiency. However, other chief executives have been restructuring the company since it ran into severe difficulties during the global financial crisis. During the crisis, GE also sought a bailout from Warren Buffett.
Once America’s best-known industrial conglomerate sold its aircraft leasing business this year to Irish company AerCap in a $30 billion deal.
GE said its gross debt reduced to more than $75 billion between 2018 and 2021 and this reduction helped the company make the latest changes.
The company said it would 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.
GE estimated that the spinoffs would cause about $2 billion in transaction and operational costs.
