GE Sells Biopharma Unit for $21 Billion

GE Sells Biopharma Unit for $21 Billion

General Electric's plan to strengthen its balance sheet through the $21.4 billion sale of its promising biopharma business is sure to delay the company's health spinoff, but experts say the unit's Chicago headquarters is safe.

GE jumped 18% to US$11.95 ahead of regular trading in NY yesterday.

The BioPharma unit, which the industrial conglomerate intends to divest, represents part of GE Life Sciences, while it generated nearly $3 billion in revenue previous year.

Danaher and General Electric are expecting the deal for GE Biopharma to close during the fourth quarter of 2019.

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. GE was the second-best performing stock in the S&P 500 Monday on the news, behind Danaher.

"Today's transaction is a pivotal milestone", Culp said in a statement published by CNN Business.

The deal will provide GE with a much-needed cash infusion as the maker of power plants and aircraft engines struggles to pay off billions of dollars of debt and insurance liabilities.

GE was up 26% this year through Friday.

Danaher estimates the acquisition will reduce GAAP diluted net earnings per share by approximately $1.15 to $1.20 but will be accretive to non-GAAP, adjusted diluted net earnings per share by approximately $0.45 to $0.50 in the first full year post acquisition. Last fall, GE sold part of its Healthcare Equipment Finance business to TIAA Bank and agreed to sell its Current, powered by GE business - part of the company's lighting business - to American Industrial Partners.

Culp told CNBC that GE chose to break up the Life Sciences unit as the biopharma business is distinct from the pharmaceutical diagnostics business.

GE also said that weakness in the GE Power unit meant it would miss its 2018 free cash flow and earnings guidance target, with the company taking a $23 billion goodwill charge to the Power division. The verdict is not universal that Danaher stole the company, but the reports all had something positive to say about the deal.

"Sale of biopharma a positive", Credit Suisse said in a note.

GE officials made the announcement on Monday.

We think this is a natural fit for Danaher's existing business, and both eliminates a major competitor in this business and creates a wide moat and gap between DHR and other competitors. Culp has been reshaping the portfolio, while looking to cut expenses and repay debt. In 2016, for instance, it bought the molecular diagnostics and medical testing business Cepheid for about $4 billion. They say Danaher will acquire the division that makes testing equipment for biopharmaceutical products. The CEO explained that their strategy would be reducing leverage and ultimately strengthen the 128-year old company's bottom line.

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