GE has announced its plan to split and form three global public companies focused on the energy, aviation and healthcare sectors.
GE suggests that as independently run companies, the businesses will be better positioned to deliver long-term growth and value for customers, investors, and employees alike.
The newly formed company focussing on energy will be the result of combining GE Renewable Energy, GE Power, and GE Digital and then pursuing a tax-free spin-off of this business in early 2024.
GE Chairman and CEO H. Lawrence Culp, Jr. said: “By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees.
“We are putting our technology expertise, leadership, and global reach to work to better serve our customers.”
Culp added, “Today is a defining moment for GE, and we are ready. Our teams have done exceptional work strengthening our financial position and operating performance, all while deepening our culture of continuous improvement and lean. And we’re not finished—we remain focused on continuing to reduce debt, improve our operational performance, and strategically deploy capital to drive sustainable, profitable growth.
“We have a responsibility to move with speed to shape the future of flight, deliver precision health, and lead the energy transition. The momentum we have built puts us in a position of strength to take this exciting next step in GE’s transformation and realize the full potential of each of our businesses.”
The move will provide a more agile strategic focus, states GE, and will ensure tailored capital allocation aligned to industry-specific dynamics.
Financially, GE will benefit from significant debt reduction, stabilized insurance, as well as strengthened liquidity and cash management.
In terms of operations, GE suggests a decentralised model will ensure leaner, more efficient operations, stronger customer relationships, as well as an opportunity to strengthen leadership and governance.
Culp will continue to serve as chairman and CEO of GE until the second spin-off, at which point, he will lead the GE aviation-focused company going forward.
Scott Strazik will be the CEO of the combined Renewable Energy, Power, and Digital business.
GE intends to execute the spin-offs of the Renewable Energy and Power business in early 2024, with the capital structures, brands, and leadership teams for each independent company to be determined and announced at a later stage.
The company expects to incur one-time separation, transition, and operational costs of approximately $2 billion and tax costs of less than $0.5 billion, depending on the specifics of the transaction.
Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as lead legal counsel. Evercore and PJT Partners are the lead financial advisors to GE on the transaction. GE also received legal advice from Gibson, Dunn & Crutcher LLP and financial advice from BofA Securities and Goldman Sachs.