Health Care

GE to sell off Baker Hughes

GE to sell off Baker Hughes”

General Electric said Monday it will exit its majority stake in Baker Hughes, an oilfield services company, over the next two to three years.

The changes will profoundly reshape an icon of American business, which is mired in one of the worst slumps in its 126-year history amid flagging demand for industrial equipment, weak cash generation and an accounting investigation by US regulators. Things got worse for GE in January, when it disclosed that the Securities and Exchange Commission was investigating the company's accounting after a $6.2 billion loss in its insurance business.

The company's latest round of winnowing arrived Tuesday, the first time since 1907 that GE will not be a member of the exclusive Dow Jones Industrial Average at the opening bell.

The company said it will be able to reduce its debt by $25 billion and remove additional risk as it reimagines itself as something very different from the multinational conglomerate it was before the Great Recession. Baker Hughes will be separated over the next two to three years.

"We are aggressively driving forward as an aviation, power and renewable energy company -three highly complementary businesses poised for future growth".

"Today marks an important milestone in GE's history", Flannery said. As speculation about GE's future mounted, many investors came to see GE-RE as an underpraised gem.

While acknowledging that GE Power needs to execute a "deep turnaround", with segment profits and orders having wilted a year ago, Flannery told investors to be patient, saying that the gas-fired power market is "not going away".

Flannery's latest moves cap a strategic review he has been pursuing since taking the helm previous year from Jeffrey Immelt, while effectively marking his second attempt to present a turnaround to investors.

The slimmed-down company will focus on jet engines, power plants and renewable energy, which GE hopes will reward battered shareholders who have seen the stock lose more than half its value over the past 20 years.

Since then, Flannery has agreed to unload GE's century-old locomotive operations.

GE expects to generate cash by selling about 20% of its stake in GE Healthcare and to distribute the remaining 80% to GE shareholders through a tax-free distribution.

In April, medical equipment maker Danaher Corp approached GE about potentially acquiring the life sciences division of its healthcare unit, a major source of sales that makes X-ray machines and hospital equipment, according to a person familiar with the matter. The company will separate GE Healthcare into a standalone company. The Munich-based manufacturer, which competes with GE in areas such as power-generation and medical scanners, sold shares in its Healthineers subsidiary in March, marking the country's second-biggest initial public offering in nearly two decades.

GE pledged to preserve its 48-cent-a-year dividend until the healthcare unit is spun off, partially appeasing investors who have expressed concerns about GE's ability to pay it.

A series of acquisitions and mergers followed over the next 25 years, until in 1920 when Victor Electric was acquired by GE, a manufacturer of x-ray tubes.

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