Health Care

GE selling off biopharma business in $21.4B deal

GE selling off biopharma business in $21.4B deal”

General Electric (GE) announced on Monday it will sell its Biopharma unit to Danaher for $21.4 billion in cash as it reduces debt amid an ongoing corporate turnaround effort.

The valuation multiples "look reasonable for a market-leading, high-end life sciences business like GE Biopharma", Dray said.

Shares in GE surged Monday, rising nearly 9% to their highest level since October 2018.

Culp told CNBC that while an IPO for the healthcare business was plan A, "this is clearly a superior path", as it gives the company a quick route to paying down debt.

- The shares have advanced 34 per cent this year through February 22, the biggest gain on a Standard & Poor's index of USA industrial companies. "We expect GE BioPharma to advance our growth and innovation strategy in an important and highly attractive life science market", Danaher CEO Thomas Joyce said.

William Blair's William Heymann reiterated a Buy rating and writes that GE's intrinsic value lies somewhere between $14 and $16 a share.

Danaher develops technology for the dental, life sciences, diagnostics and environmental industries. The company divested this unit to "reduce leverage and strengthen [its] balance sheet", Lawrence Culp Jr., GE chairman and CEO, said in a press release.

Danaher and General Electric are expecting the deal for GE Biopharma to close during the fourth quarter of 2019. GE will receive cash proceeds of about $21 billion while also transferring certain pension liabilities to Danaher. "It lost two-thirds of its market value in the last two years amid a series of operational and investment missteps". That will leave GE with a US$17 billion business manufacturing MRI machines and other imaging equipment.

Instead, the company will prioritize completing the Danaher deal while retaining the rest of its healthcare unit. After being named as the new CEO last fall, Larry Culp said GE needed to simplify its business structure even more. It makes instruments and software that support the research and development of drugs, accounting for 15% of GE's healthcare business revenue in 2018. Such substances, or contrast agents, from GE are used in about 90 million patient procedures each year, according to the company's statement.

GE said this month that it would downsize its world headquarters in Boston and return $87 million in incentives it received from MA for moving from CT three years ago. The company also reported, though, that cash flow from operations was down 8.6% year over year, to about $6.4 billion. "That's what took the stock down, and that's still going to take some time play out", said Richard Grasfeder, a portfolio manager at Boston Private Wealth LLC, which held about 478,204 shares in GE as of the end of 2018, down from 787,600 shares a year earlier.

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