General Electric Co (GE) has announced the splitting of its conglomerate into three public companies, in an effort to simplify its business and pare down debt.
The split marks the end of the 129-year-old conglomerate that was once the most valuable U.S. corporation and a global symbol of American business power.
GE shares closed 2.6% higher at $111.29 on Tuesday, after reaching a nearly 3-1/2 year high, compared with a 0.35% drop in the broader S&P 500 (.SPX) index.
The industrial conglomerate’s shares have gained about 9% since July 30 when the company reduced the number of its traded shares.
The Boston-based company said the three businesses would focus on energy, healthcare and aviation.
GE will separate the healthcare company, in which it expects to retain a stake of 19.9%, in early 2023.
It will combine GE Renewable Energy, GE Power and GE Digital and spin off the business in early 2024.
Following the split, it will become an aviation company, helmed by GE Chief Executive Larry Culp. The aviation company will inherit GE’s other assets and liabilities, including its runoff insurance business.
A company spokesperson said brands and names of the spun-off units will be decided later.
It is the boldest attempt under Culp, who took GE’s reins in 2018, to simplify the company’s business.
In the past three years, Culp has focused on reducing debt by selling assets, and improving cash flows by streamlining operations and cutting overhead costs.
The measures have led to an improvement in GE’s balance sheet, putting it on track to reduce debt by more than $75 billion by the end of 2021.
The company now expects to generate more than $7 billion in free cash flow in 2023 and is planning to monetize its stakes in Baker Hughes, AerCap and the healthcare unit to cut its net debt to less than $35 billion by then.
In an interview with Reuters, Culp said the decision to split the company was paved by GE’s progress in terms of repairing its balance sheet and operational performance.
He did not expect the spinoff to face any regulatory or labor issues and said there was no investor pressure behind the decision.
The company’s revenue for 2020 was $79.62 billion, a far cry from the $180 billion-plus in revenue it booked in 2008.
– Parrot