NEW YORK – The quickly shrinking General Electric is on the verge of getting much smaller.
Cash-strapped GE revealed plans on Tuesday to spin off its health care business and sell its stake in oil and gas company Baker Hughes. GE plans to use the proceeds to pay down the mountain of debt piled on its balance sheet.
The announcement comes on the first day in 110 years that GE will not be in the Dow Jones Industrial Average. GE was replaced by Walgreens Boots Alliance in the elite 30-stock index Tuesday.
The moves will leave GE, once one of America’s great conglomerates, focused on just aviation, power and renewable energy.
GE has already agreed to sell its century-old rail division and is searching for a buyer of the iconic light bulb unit that Thomas Edison founded. On Monday, GE said goodbye to its distributed power business, which sells equipment used to generate electricity in remote areas. GE has already unloaded NBC Universal as well as much of GE Capital, the banking division that nearly killed the company during the financial crisis.
“Today marks an important milestone in GE’s history,” CEO John Flannery said in a statement.
Flannery said the remaining businesses are “highly complimentary” and “poised for future growth.” He pledged to continue to make GE “simpler and stronger” while cleaning up its bloated balance sheet.
The decision marks a major shift by GE, which had previously said health care would remain one of its three big businesses. The division makes MRI machines and sells other medical equipment to hospitals and labs. It raked in $19.1 billion of revenue last year, accounting for 16% of the company’s total sales.
Flannery called GE Healthcare an industry leader with a strong balance sheet and innovative technology. But GE wants to make the health care division a standalone company. The plan is for GE to raise cash by selling a 20% stake and then distributing the remainder to shareholders. The exact structure and timing will be determined at a later date. GE expects to complete the transactions over the next 12 to 18 months.
GE’s decision to unload its majority stake in Baker Hughes is a dramatic reversal. Less than a year ago, GE completed the merger of its oil and gas business with Baker Hughes, creating an oil services giant.
However, now GE plans to sell its 62.5% stake in Baker Hughes over the next two to three years. Certain restrictions prevent GE from exiting the business before mid-2019.
Flannery pledged to continue shrinking GE Capital, which at one time was one of America’s biggest banks but is now a source of financial pain. GE plans to sell $25 billion in energy and industrial finance assets by 2020.
Yet GE Capital is requiring even more resources from the parent company. GE said it plans to pump another $3 billion into GE Capital in 2019. GE said it’s “actively exploring” ways to cut its insurance exposure.
GE shocked Wall Street — and regulators — in January when it announced a $6.2 billion insurance loss and warned it will need to inject $15 billion into the business. The news sent GE’s stock spiraling and triggered an investigation from the SEC.
