- 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, which has made its mark as a biomanfacturer.
- 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."
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 company has been bulking up its life science and manufacturing capabilities in recent years. GE Healthcare has a "factory-in-a-box" that has been integral in manufacturing and is now being utilized in cell therapy development. Products like the FlexFactory are allowing drug manufacturers to scale up cell therapies as they move from clinical trials to commercial operations.
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 Healthcare 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."