By Joyce Yu
Philadelphia, PA–General Electric Co said on Tuesday it will spin off its healthcare business and divest its stake in oil-services firm Baker Hughes. This follows the company’s Monday announcement to divest its distributed power unit for $3.25 billion to U.S. buyout group Advent. The latest moves mark the breakdown of the 126-year-old conglomerate which was once the most valuable U.S. corporation and a global symbol of American business power. The slimmed-down company said it will focus on jet engines, power plants and renewable energy.
Once a business power house, GE saw its shares losing half its value over the past 20 years. Having performed the worst compared with stocks of its peers, GE, a founding member of the Dow Jones industrial average, was replaced by Walgreens as a Dow constitute effectively from today.
GE said it will spin off the profitable healthcare unit over the next 12 to 18 months, and sell its Baker Hughes stake over two to three years. The company announced yesterday a $3.25 billion deal to sell to the private equity firm Advent International its distributed power business, which makes gas engines that are used to generate electricity in remote places. The deal includes not only GE’s Jenbacher and Waukesha brands, but also its manufacturing plants in the United States, Canada and Austria.
“This is really the culmination of 10 years of observations I’ve had about the company,” Chief Executive Officer John Flannery, a GE veteran who took the helm in August, commented during an investors’ conference call. “We are aggressively driving forward as an aviation, power and renewable energy company – three highly complementary businesses poised for future growth.” GE shares jumped for the most in three years – nearly 7% to $13.63.
With these moves, the company ends its year-long strategic review. GE said its plan to divest $20 billion in assets “is substantially complete.” By becoming “simpler and stronger”, it hopes boost growth, operating profits and shareholder returns.
Also marking a major milestone in the American business history is the closure of Toys “R” Us. The 70-year old company will close its remaining 200 stores on Friday. In an attempt to turn the company around, Toys “R” Us filed for bankruptcy in September, but terrible Christmas sales left it on life support, resulting in the company’s announcement in March that it plans to go out of business. Toys “R” Us will, however, continue in some other countries, such as Canada.