GE selling BioPharma unit for $21.4 billion to reduce debt

GE selling BioPharma unit for $21.4 billion to reduce debt

Shares of General Electric Co. surged 15 percent on Monday after the industrial conglomerate said it would sell its biopharma business to Danaher Corp. for $21.4 billion, its first major asset sale under new Chief Executive Officer Larry Culp.

- GE jumped 8.1 per cent to US$10.99 ahead of regular trading in NY.

Sources familiar with the matter told Reuters on Monday that GE will put the initial public offering of the unit on hold until the deal with Danaher closes, expected in the second half of the year.

GE is considerably smaller now than it was before becoming entangled in the financial crisis a decade ago and wants to divest even more of its businesses.

In the transaction, GE received approximately $2.9 billion in cash as well as shares of Wabtec common stock and Wabtec non-voting convertible preferred stock that, together, represent an approximately 24.9 per cent ownership interest in Wabtec.

In an announcement made to the media, Culp mentioned that the sale is pivotal to the company's planned return and a milestone in its revitalization efforts. GE's pharmaceutical imaging agents are used in approximately 90 million patient procedures each year.

The business will be established as a stand-alone operating company within Danaher's $6.5 billion Life Sciences segment, joining the Company's Pall, Beckman Coulter Life Sciences, SCIEX, Leica Microsystems, Molecular Devices, Phenomenex and IDT businesses. The deal not only eases those concerns, but it also shows that Culp is doing what he was brought in to do: Break with GE's past missteps and make changes, quickly.

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Another analyst, Dan Brennan of the investment bank UBS, said it "looks like a great fit" for Danaher, particularly given how it fits with a previous acquisition of Pall, he wrote in a February 25 note to investors. The company is also spinning off the remaining healthcare business, selling GE Capital assets and retreating from the oil-and-gas giant Baker Hughes.

Danaher shares were advancing 8.97 percent to $123.66 premarket.

"We're going to focus on improving our core imaging business while we evaluate other options". GE is expected to report its 2019 outlook at an earnings call scheduled on March 14.

"We have too much debt", Culp said. They say Danaher will acquire the division that makes testing equipment for biopharmaceutical products.

Danaher will pay for the GE purchase with cash and $3 billion raised from an equity offering, plus new debt or credit. According to sources familiar with the negotiations, GE will receive around US$20 billion in net proceeds.

GE's decision to sell GE BioPharma to its CEO's old company may raise eyebrows among investors.

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