If you were concerned about General  you were not alone. Many of the top stock analysts, commentators and stock companies have been watching the troubled industrial conglomerate and its new CEO, Larry Culp, for signs that the company's troubles are behind him.
Well, on Monday came the time everyone was waiting for, Culp announced a surprising plan to sell the company's BioPharma business to his former company Danaher (NYSE: DHR) . Shares collided with the news for the deal, but there were other hidden gems in the company's press release, which had to make investors feel even safer that GE could finally stabilize.
What's the Big Deal
In June 2018, former CEO John Flannry announced that GE would turn GE Healthcare, the well-managed health unit of the company. It was a two-pronged sword for investors, as GE Healthcare had some of the best margins of each unit in the company – only GE Aviation stood out higher. Raising it meant that these margins-not to mention the unit's assets-would have disappeared forever.
But GE plans to load the healthcare department with debt and pension liabilities before spinoff, which will put GE in a stronger financial position, as those positions have come out of its balance sheet. Also, now that GE has got rid of (or announced its plans to get rid of) of its appliances, consumer lighting and oil and gas blocks, Healthcare no longer fits into what the rest of the company does: types of turbines.
On Monday, however, these plans were overcome. GE will now sell its BioPharma division, which manufactures the equipment and software needed by companies to explore, develop and produce biopharmaceuticals – which, frankly, are really great things. The annual revenue is about $ 3 billion a year (about 15% of GE Healthcare's total), leaving much of GE Healthcare unaffected by the deal.
Why Is It A Big Job
The buyer is Danaher, another industrial conglomerate that was granted by Culp from 2001-2014. After leaving, Danaher rediscovers himself by selling or selling some of his industrial businesses and acquiring biotech companies. For example, in 2016, Danaher handed out about 20 of his business, including measuring devices and automotive equipment, such as Fortive while acquiring a molecular diagnostic company, Cepheid, Inc. In 2018, she announced that she would acquire integrated DNA technology. That's why GE's BioPharma division should feel at home with her new parent. Danaher will also acquire $ 400 million of GE's pension obligations, which further aid GE's balance. And at a sale price of just over 7 times the annual revenue, there is no doubt that the price is correct. This alleviates some concerns that GE will have to resort to the pricing of the sale of fires as it unloads its assets.
And GE can still hold the rest of its better health unit, which can then be as far away as planned to sell off or stick. Despite some initial announcements that the spinof is definitely out of the table, Calp has clarified to CNBC that he is simply reevaluated, but that "IPO in 2019 seems unlikely at this time."
So the deal itself is great for both companies, but in the press release announcing it, GE also drew attention to two other major concerns investors had about GE: Planning and Transparency.
An even bigger deal
So far Culp did not want to give any details about what GE's future is about, beyond big speeches, such as the need to "bolster business, starting with [GE’s troubled unit] Power," and the need from the debt reduction company.
In general, Calp is less precedent than his predecessor, Flaner, who at this point in his term has already chaired several non-revenue conference calls and which, together with Chief Financial Officer Jamie Miller, made presentations to several industrial conferences.
But in the press release, GE announced that Culp would make a presentation just over a week at the J.P. Morgan Aviation, Transportation & Industrials on March 5, his first appearance as Chief Executive Officer. Analyst J. P. Morgan Steve Toussa is one of the most vocal GE bears and is expected to lead a Q & A session with Culp, so it is a big step forward in the company's readiness to answer tough questions.
In addition, GE has scheduled a conference call for training on March 7 to respond to the company's insurance situation that has caused so many headaches in the company over the past year. He then plans to release the company's forecast for the conference call on March 14, and five days later Chief Financial Officer Miller will make his first presentation during Culp's stay at the Bank of America Merrill Lynch Global Industrials and EU Autos conference.
After three months of almost complete silence on the radio, this flow of information and interaction seems to indicate that the company has heard criticism and is determined to deal with them directly.
Turning the corner
The sudden rejection of Flannery and the climbing of Culp to C-suite is what appears to be a lack of a specific plan going beyond what Flannery shared in June 2018. While the deal with BioPharma is big , investors should pay more attention to all the information the company offers. will share until mid-March and see if he will agree with them. Remember, it is still quite possible that this deal is announced in advance for the biggest look. So it may be premature to say that GE has definitely gone.
Two weeks ago, after the GE's fourth-quarter revenue report, I wrote: "Perhaps Calp will pull a rabbit from his hat and surprise everyone with strategic craftsmanship." At the time, I considered the prospect unlikely, but even this bear of GE must admit that Monday's disclosures should make a long way to improving GE's investors' confidence in the company and its management.