GE to spin off healthcare unit in latest restructuring
- General Electric said Tuesday it will spin off its healthcare unit into a standalone company, part of a plan to refocus the industrial giant on aviation, power and renewable energy. The conglomerate is also unloading its Baker Hughes oil and gas services and equipment business.
- GE Healthcare president and CEO Kieran Murphy will stay in his role, leading the spinoff.
- Moody’s Investor Service affirmed its A2 bond credit rating for GE and GE capital, calling the decision to separate from GE Healthcare and Baker Hughes a “net credit positive.”
GE CEO John Flannery took the reins last August to right a ship whose stock has trended south for much of the last year. GE’s shares jumped nearly 8% to $13.74 Tuesday on news of the plan, the stock's best day in more than three years.
Moody’s called the move the right choice at the right time. “Moody’s anticipated that the company would need material changes to its business portfolio,” the ratings firm said. “The planned separation of GE Healthcare would be the most significant move to date, and follow closely on the planned sale of GE Transportation to Westinghouse Air Brake Technologies Corp., and other asset divestitures.”
The spinoff comes as GE Healthcare has been undergoing some restructuring of its own. In April, the unit sold a package of health IT tools to Veritas Capital for $1 billion. The deal included GE’s revenue cycle, ambulatory care and workforce management assets.
That deal was seen as a move to rid the company of less profitable assets. Of GE’s $122 billion in revenue last year, GE Healthcare contributed $19 billion, but IT and digital tools accounted for just $2 billion in sales.
The bulk of GE Healthcare’s sales — about $8 billion — stems from diagnostic imaging. Life sciences yields about $5 billion in sales and mobile diagnostics accounts for $4 billion.
The unit still has a health IT portfolio, including artificial intelligence, data analytics and imaging.
“GE Healthcare will continue to significantly invest in core digital solutions, such as smart diagnostics, connected devices, AI and enterprise imaging,” Kieran Murphy, president and CEO of GE Healthcare, said at the time. “We will continue to lead in data analytics, command center, advanced visualization and image management tools.”
The spinoff could impact the EHR market, according to a new Kalorama Information report, which calls GE Healthcare a “significant player” with 5% market share via its Centricity EHR.
“Five percent is large when no one in the market has more than twenty,” Bruce Carlson, Kalorama publisher, said in a statement. “GE isn’t a pure EHR competitor as their software is integrated, but they do compete.”
- General Electric GE Focuses Portfolio for Growth and Shareholder Value Creation
- The Wall Street Journal GE Will Spin Off Health-Care Business in Latest Revamp