General Electric Co. plans to spin off its health-care business and unload its ownership in oil-services company Baker Hughes, people familiar with the matter said, betting that the once-sprawling conglomerate can reverse a painful slump by further shrinking.
The announcement comes roughly a year after GE completed its buyout of Baker Hughes, merging the company with its GE Oil & Gas division and creating the world’s second-largest oilfield service provider by revenue. GE plans to fully separate its 62.5% interest in Baker Hughes in an “orderly manner” over the next two to three years, the company said in the release.
The moves are the conclusion of a yearlong strategic review by CEO John Flannery that has been tumultuous for GE employees and investors. The one-time industrial bellwether has slashed its dividend and has already set plans to shed numerous businesses. Its shares have tumbled by half in the past year, erasing more than $100 billion in wealth.
The final plan, expected to be presented to investors on Tuesday, focuses GE around its power, aviation, and renewable-energy businesses, the people said. These units, which accounted for more than half of GE’s $122 billion in revenue last year, mostly sell turbines to power plants and engines to jet makers.
GE’s revamped board has approved the new strategy and there are no plans to sell additional divisions or break apart the aviation and power divisions, said people familiar with the discussions.
Analysts with Tudor, Pickering, Holt & Co. (TPH) said the news as it relates to Baker Hughes is both good and bad.
“Good news is that investor concerns that GE would find a way to jettison its 62.5% interest in Baker Hughes in one fell swoop over near-term were misguided. Bad news [in terms of supply/demand for BHGE shares] is that GE does indeed plan to fully separate from Baker Hughes over next two to three years,” TPH analysts said in a morning note on June 26.