GE sells biopharma unit for $21 billion

GE sells off BioPharma business to Danaher for $21.4B

General Electric has agreed to sell its biopharma business to Danaher Corp for $21.4 billion in the biggest change of strategy after Lawrence Culp took over as chief executive of the industrial conglomerate in September a year ago.

The biopharma sale also propelled a broad rally in GE's roughly $120 billion of bonds, which had taken a pounding in late 2018 as it became clear that earlier restructuring efforts were falling short and that the company would need to take more aggressive action to address its debt load in particular. Danaher said after tax benefits, the deal will have a price tag that is closer a $20 billion.

Shares of GE jumped 11 percent before the opening bell Monday.

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 company's shares rose 10 percent in response. "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.

Shares of GE rocketed higher after the announcement.

Pharmaceutical Diagnostics, now part of GE Life Sciences, will remain within the GE Healthcare portfolio.

"Today's transaction is a pivotal milestone", G.E.'s chief executive, H. Lawrence Culp Jr., said in a statement. GE is expected to report its 2019 outlook at an earnings call scheduled on March 14.

GE will sell the division to Danaher for $21.4 billion, the companies announced. "It lost two-thirds of its market value in the last two years amid a series of operational and investment missteps". The buyer is Danaher Corporation, which happens to have been previously run by GE chief executive Larry Kulp, who served as chief executive at Danaher between 2001 and 2015. Meanwhile, the pharmaceutical diagnostics business will remain under the GE Healthcare portfolio.

The transaction allows the company to slim down further, and covers instruments and software that support research and development of biopharmaceutical drugs, a business that comprises about 15 per cent of the revenues of GE's health sector.

Culp was formerly CEO of Danaher, where he was instrumental in transforming the company. The remaining parts posted about $17 billion in revenue past year, the company stated, with operating profit margins in the mid-teens. "It's unlikely we would do something here in the near to medium term". "We have more work to do, but I'm encouraged by the changes we're making to strengthen GE and create value for our shareholders, customers, and employees". So by selling off the unit for $21 billion in capital that will be coming into GE, it also added nearly $7 billion in market to end with a $94 billion market value.

Related:

Comments


Other news