GE Plans to Form Three Public Companies Focused on Growth Sectors of Aviation, Healthcare, and Energy
GE plans to spin off its Healthcare and Renewable Energy businesses, creating three independent public companies focused on aviation, healthcare, and energy. The Healthcare spin-off is expected to occur in early 2023, retaining a 19.9% stake, while the Renewable Energy and Power spin-off will follow in early 2024. GE aims for high-single-digit free cash flow margins in 2023 and significant debt reduction using proceeds from recent transactions. The plan is designed to enhance operational focus and create long-term value for investors.
- Plan to spin off Healthcare in early 2023 and Renewable Energy/Power in early 2024, creating distinct investment-grade public companies.
- Targeting high-single-digit free cash flow margins in 2023.
- Significant debt reduction expected through recent GECAS transaction.
- Expecting one-time separation and transition costs of approximately $2 billion and tax costs under $0.5 billion.
- Transactions are subject to customary conditions, which may delay completion.
Next step in transformation to realize full potential of each business
-
GE Aviation ,GE Healthcare , and the combined GE Renewable Energy,GE Power , and GE Digital businesses to become three industry-leading, global, investment-grade public companies -
GE intends to execute tax-free spin-offs of Healthcare in early 2023 and of the Renewable Energy and Power company in early 2024 - Builds on significant momentum from strengthened financial position and operating performance
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GE remains focused on driving operational improvement for sustainable profitable growth in the current portfolio of businesses, leading to high-single-digit free cash flow margins in 2023 -
GE will use proceeds from recently closed GECAS transaction to significantly reduce debt in the near future; remains committed to continued debt reduction along with strategic capital deployment -
Company to host a call with investors at
8:15 am ET
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Pursuing a tax-free spin-off of
GE Healthcare , creating a pure-play company at the center of precision health in early 2023, in whichGE expects to retain a stake of 19.9 percent; and -
Combining GE Renewable Energy,
GE Power , and GE Digital into one business, positioned to lead the energy transition, and then pursuing a tax-free spin-off of this business in early 2024. -
Following these transactions,
GE will be an aviation-focused company shaping the future of flight.
As independently run companies, the businesses will be better positioned to deliver long-term growth and create value for customers, investors, and employees, with each benefitting from:
- Deeper operational focus, accountability, and agility to meet customer needs;
- Tailored capital allocation decisions in line with distinct strategies and industry-specific dynamics;
- Strategic and financial flexibility to pursue growth opportunities;
- Dedicated boards of directors with deep domain expertise;
- Business- and industry-oriented career opportunities and incentives for employees; and
- Distinct and compelling investment profiles appealing to broader, deeper investor bases.
Culp continued, “Today is a defining moment for
Meaningful Progress Enabling Next Step in GE’s Transformation
This plan builds on the meaningful momentum that
Stronger Financial Position
- Focused and de-risked through strategic portfolio actions including recent GECAS transaction, resulting in a simpler, stronger, more focused high-tech industrial company;
-
Expect to achieve greater than
of gross debt reduction from the end of 2018 through the end of 2021;$75 billion -
Stabilized Insurance and mitigated funding risks through capital contributions of since 2018, investment portfolio actions, improved claims management, and premium increases;$9.4 billion -
Managed pension obligations with discipline, including funding
since 2018 and freezing most pension plans in the$8.5 billion U.S. andU.K. , and expect no further contributions will be needed through the end of the decade; and - Strengthened liquidity and improved cash management, including eliminating on-book factoring, and today announcing plan to eliminate remainder of GE’s off-book factoring.
Stronger Business and Operating Performance
- Implemented decentralized operating model by moving the center of gravity closer to customers, which enabled stronger customer relationships and operational improvement in GE’s nearly 30 P&Ls;
- Scaled lean company-wide, driving performance improvements and culture change;
- Improving operating performance in businesses to drive consistent, sustainable free cash flow, while enhancing transparency and financial flexibility to reinvest in growth opportunities;
- Strengthened leadership and governance with Board refreshment, numerous leadership appointments, and auditor transition; and
- Emerging from COVID-19 headwinds, while improving cash generation, playing offense, and investing for growth.
In today’s portfolio of businesses,
Management
Culp will serve as non-executive chairman of the
Three Industry-Leading Global Public Companies1
|
Aviation |
Healthcare |
Renewable Energy and Power |
Focus |
Helping customers achieve greater efficiency and sustainability and invent the future of flight. |
Driving innovation in precision health to address critical patient and clinical challenges. |
Supporting customers and communities seeking to provide affordable, reliable, and sustainable power |
Differentiated offering |
Global leadership in propulsion and systems; most competitive and innovative engine value proposition (efficiency, reliability, lifecycle economics) with youngest and largest commercial fleet and most diversified services portfolio. |
At the nexus of most care pathways; leading equipment business complemented by higher-margin services; offering diagnostics, interventional imaging, life care, therapy planning, and digital, with the opportunity for much faster growth. |
Offering the world’s most powerful wind turbines; most efficient gas turbines and most powerful steam turbines; technology to modernize and digitize grid and electrical infrastructure; and carbon-free power sources like nuclear, hydro, and hybrids. |
Global impact |
Powering 2/3 of commercial flights |
Serving 1B+ patients, 2B+ procedures/year |
Together with our customers, providing 1/3 of the world’s power |
Installed base |
~37,700 commercial aircraft engines2 and ~26,500 military aircraft engines |
4M+ installations |
400+ gigawatts of renewable energy installed, 7,000+ gas turbines |
Transaction Details
Through the transition,
Following the spin-off transactions,
The company expects to incur one-time separation, transition, and operational costs of approximately
The transactions are subject to the satisfaction of customary conditions, including final approvals by GE’s Board of Directors, private letter rulings from the
Advisors
Conference Call and Webcast
The conference call will be broadcast live via webcast, and the webcast and accompanying slide presentation containing financial information can be accessed by visiting the Events and Reports page on GE’s website at: www.ge.com/investor. An archived version of the webcast will be available on the website after the call.
Forward-looking Statements
This document contains “forward-looking statements”—that is, statements related to future, not past, events. These forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “estimate,” “forecast,” “target,” “preliminary,” or “range.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) the ability to effect the transactions described above and to meet the conditions related thereto, (2) potential uncertainty during the pendency of the transactions that could affect GE’s financial performance, (3) the possibility that the transactions will not be completed within the anticipated time period or at all, (4) the possibility that the transactions will not achieve their intended benefits, (5) the possibility of disruption, including changes to existing business relationships, disputes, litigation or unanticipated costs in connection with the transactions, (6) uncertainty of the expected financial performance of
Non-GAAP Financial Measures
In this document, we sometimes use information derived from consolidated financial data but not presented in our financial statements prepared in accordance with
About
______________________
1 Some steps may be subject to information & consultation with employee representatives where required by law.
* Non-GAAP measure
2 Including
* Non-GAAP measure
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