Published: Wed, February 27, 2019
Medical | By Vicki Mclaughlin

GE continues to downsize: Firm selling biopharma division for $21.4 billion

GE continues to downsize: Firm selling biopharma division for $21.4 billion

Wall Street was elated to learn yesterday that General Electric - which was delisted from the Dow Jones industrial average last year after a 110-year run - is selling its BioPharma subsidiary to Danaher Corp. for $21.4 billion. That's as part of GE's group-wide efforts to reduce debts and restructure.

GE also announced several upcoming events, including the release of its 10-K annual report this week and a presentation by Culp at a JPMorgan Chase & Co. conference March 5.

GE will shelve plans for the initial public offering as it turns its attention to completing the deal with Danaher, Culp said. "It demonstrates that we are executing on our startegy by taking throughful and deliberate action to reduce leverage and strengthen our balance sheet".

At the end of 2018, GE had $21 billion on the books in outstanding pensions. GE's biopharma business accounted for 15 percent of the company's healthcare revenue in 2018.

For GE, the biopharma business is a relatively small chunk of its larger healthcare business.

GE Healthcare CEO Kieran Murphy said in the statement: "The biopharma business has been a strong contributor to our success, and I am confident this agreement represents a great opportunity for our valued colleagues to flourish under the ownership of Danaher", which Culp led until 2014. And given GE's CEO's close familiarity with both companies and presumed warm feelings for his old place of employ, it makes sense that this deal would appeal to both buyer and seller. It will finance the transaction with $3 billion from an equity offering.

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"'The business will be established as a stand-alone operating company within Danaher's $6.5 billion Life Sciences segment so no integration with Pall, ' a spokesperson told us, adding 'the businesses are very complementary, so no divestitures expected, '" Stanton continues. The biopharma unit sells instruments, consumables and software to support R&D and manufacturing for drugs.

Retaining full control of GE Healthcare will likely dim the immediate prospect of an IPO for the business, and Culp stressed that refining the overall business is key to his restructuring of the business. It brought in $3 billion in revenue past year.

The sale leaves GE's healthcare unit with its medical device unit, which makes X-ray, CT scan and MRI machines, and its pharmaceuticals diagnostic unit.

"Today's transaction is a pivotal milestone", said GE Chief Executive Lawrence Culp. Culp is trying to pull GE out of a two-year tailspin that saw stock losses wipe out more than $200 billion shareholder value.

Investors apparently agree, as Danaher stock - which had gained 7.8% by 11:40 a.m. EST - is going up in tandem with GE's. "It's unlikely we would do something here in the near to medium term".

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