General Electric (NYSE: GE) has announced plans to shrink its business even further by spinning off its health care business and selling its stake in oil and gas company Baker Hughes. The moves are part of the company’s plan to shed $25 billion in energy and industrial finance assets by 2020. According to the company, the proceeds from the sales will be used to pay down debt and boost the company’s cash levels.
GE plans to make the health care division a standalone company. The division accounted for 16 percent of the company’s total sales last year, earning $19.1 billion in revenue. GE will sell 20 percent of the health care business then distribute the remainder to shareholders over the next 12 to 18 months. Roughly $18 billion of debt and pension obligations will be transferred to the new entity as part of the spin-off.
GE completed the merger of its oil and gas business with Baker Hughes less than a year ago, making its decision to unload its majority stake surprising to many. As restrictions prevent GE from exiting the business before mid-2019, GE plans to sell its 62.5 percent stake over the next two to three years. The stake is currently valued at around $23 billion.
GE has already unloaded many of its major assets. In recent years, it has gotten rid of its rail division, its light bulb unit, its NBC Universal entertainment division, its distributed power unit and its appliance business. The company has also sold much of its GE Capital banking division.
The company now plans to narrow its focus to aviation, power, and renewable energy. CEO John Flannery said the remaining businesses are “highly complementary” and “poised for future growth.” Last year, GE cut its dividend in half and slashed thousands of jobs as a cost saving measure. It will be interesting to see how these latest moves play out for the company.
The company’s stock has taken a beating in recent years. The stock is near its lowest level in about nine years and has fallen nearly 80 percent from its highs in 2000. Last year, the value of the company’s shares fell by more than half. So far in 2018, it has fallen another 25 percent.