General Electric to break up into 3 listed companies

CHICAGO • General Electric will split into three public companies as the storied US industrial conglomerate seeks to simplify its business, pare debt and breathe life into a battered share price, the company said on Tuesday.

The split marks the end of the 129-year-old conglomerate that was once the most valuable US corporation and a global symbol of American business power.

A founding member of the Dow Jones Industrial Average in 1896, GE spent more than a century in that storied stock index before getting the boot in 2018 following years of sliding valuation.

GE created the first electric cooking range and clothes washer, the first nuclear power plant, and supplied the US space programme. Its interests have spanned television, movies and insurance to light bulbs and locomotives.

GE shares closed 2.6 per cent higher at US$111.29 on Tuesday, after reaching a nearly 3½-year high, compared with a 0.35 per cent drop in the broader S&P 500 index. The industrial conglomerate's shares have gained about 9 per cent since July 30 when the company reduced the number of its traded shares.

GE said the three businesses would focus on energy, healthcare and aviation.

GE will separate the healthcare company, in which it expects to retain a stake of 19.9 per cent, in early 2023. It will combine GE Renewable Energy, GE Power and GE Digital and spin off the business in early 2024.

Following the split, it will become an aviation company, helmed by GE chief executive Larry Culp. The aviation company will inherit GE's other assets and liabilities, including its runoff insurance business.

It is the boldest attempt under Mr Culp, who took GE's reins in 2018, to simplify the company's business. In the past three years, he has focused on reducing debt by selling assets, and improving cash flows by streamlining operations and cutting overheads.

The measures have led to an improvement in GE's balance sheet, putting it on track to cut debt by more than US$75 billion (S$101 billion) by end-2021.

The company expects to generate more than US$7 billion in free cash flow in 2023 and plans to monetise its stakes in Baker Hughes, AerCap and the healthcare unit to cut its net debt to less than US$35 billion by then.

Mr Culp's strategy is in stark contrast to the path GE pursued in the 1980s and 1990s under Mr Jack Welch, who expanded the company into an industrial behemoth.

However, it has been facing investor scepticism about its ability to turn the corner since the 2008 financial crisis, while struggling with debt. The sagging fortunes prompted the company to fire chief executive John Flannery and hand over the reins to Mr Culp.

The company's revenue for 2020 came to US$79.62 billion, a far cry from the US$180 billion-plus it booked for 2008.

GE's aviation business, usually its cash cow, makes jet engines for Boeing and Airbus.

Questions remain over how the company will fund the unit's operations, which tend to be very capital-intensive.

REUTERS