After years of speculation and false starts, General Electric is officially spinning off its healthcare business into an independent company.
GE Healthcare, already a clearly defined division under the GE umbrella, is slated to become a standalone public company in early 2023, after the completion of its tax-free spinoff from the nearly 130-year-old industrial giant. GE said it expects to retain a stake of just under 20% in the resulting company.
The healthcare company is set to be led by Peter Arduini, who was tapped earlier this year to take on the role of CEO and president of GE’s healthcare division at the start of 2022.
Alongside that split, GE will combine its renewable energy, power and digital divisions into a single business and then, in early 2024, conduct a second spinoff, releasing that energy-focused entity as another public company.
The remainder will become GE Aviation, led by the conglomerate’s current CEO, H. Lawrence Culp. Culp will also serve as non-executive chairman of the new GE Healthcare after it leaves the nest.
The shake-up is expected to set GE back by about $2 billion in one-time separation, transition and operational costs, plus tax fees of less than half a billion dollars, depending on the specifics of the transactions.
“By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation and strategic flexibility to drive long-term growth and value for customers, investors and employees,” Culp said in a statement. “We are putting our technology expertise, leadership and global reach to work to better serve our customers.”
This isn’t the first time that GE has considered pushing its healthcare division out of the nest. It last announced plans to do so in June 2018, when the hypothetical spinoff company was valued at up to $70 billion. Though GE was said to have filed for a confidential IPO in December of that year, the divorce plans were dashed when the company opted instead to simply sell off its biopharma manufacturing business to Danaher in a $21.4 billion deal, which was relaunched as Cytiva.
Even as GE has found itself struggling to stay afloat and shedding many of its assets, GE Healthcare has remained relatively stable and focused on growth in recent years. On its own, the healthcare division comprised $18 billion of the entire company’s nearly $80 billion in total global revenue for 2020. Those earnings were driven largely by sales of respiratory devices and imaging and ultrasound machines.
GE Healthcare has continued to focus the bulk of its attention in those areas. In September, for example, it dropped almost $1.5 billion on BK Medical, which develops imaging support technology for use in the operating room. Prior to that, in May, the company scooped up France’s Zionexa and its molecular imaging agent, which was recently approved by the FDA to help diagnose breast cancer.
Those acquisitions build on GE’s homegrown efforts to expand its imaging portfolio. In back-to-back debuts earlier this year, it began rolling out first a new wireless ultrasound device that’s small enough to fit in a clinician’s pocket, then another point-of-care ultrasound, this one powered by artificial intelligence and specifically designed to be used in COVID-19 wards.