GE sells BioPharma unit to Danaher
General Electric (GE) was trading ~18% higher during the pre-market trading session today after the company made a breakthrough toward strengthening its balance sheet and reducing its debt obligation.
The industrial conglomerate today revealed that it has entered a definitive agreement to sell its BioPharma business to Danaher (DHR) for a total consideration of $21.4 billion. According to the deal, Danaher will pay $21 billion in cash and assume some of GE’s pension liabilities. Both the companies are expecting to complete the transaction in the fourth quarter of 2019.
The transaction will bring in massive cash flows to GE that could help it reduce debt and strengthen its balance sheet. At the end of fiscal 2018, the company had long-term debt of over $110 billion.
The latest asset deal is in line with GE’s ongoing business restructuring and realignment plan. The industrial conglomerate (XLI) has been grappling with a severe liquidity problem for the last few years. To strengthen its balance sheet, GE announced a series of restructuring plans in June last year.
GE’s restructuring plan mainly involves the spin-off and divestment of certain assets to focus on three primary sectors: aviation, renewable energy, and power. In November 2018, GE sold its Current business unit, sold $1.4 billion worth of its healthcare equipment finance portfolio, and offloaded $4 billion worth of its stake in Baker Hughes (BHGE). Later in December, the company filed for an IPO for its healthcare unit.
Although the company’s restructuring initiatives are at a very nascent stage, the pace at which CEO Larry Culp has been implementing them has helped the stock gain investors’ confidence in the last two months. In the YTD period, the stock has gained 34.3%, significantly outperforming peers such as Honeywell International (HON) and 3M Company (MMM), which have returned ~16% and 9.9%, respectively, in the same timeframe.