GE plans to spin off into trio of public firms
General Electric, the storied American manufacturer that struggled under its own weight after growing to become a sprawling conglomerate, will divide itself into three public companies focused on aviation, health care and energy.
It is the culmination of a yearslong reshaping of a symbol of American manufacturing might that could signal the end of such conglomerates as a whole.
“It’s over now,” said Nick Heymann of William Blair, who has followed GE for years. “In a digital economy, there’s no real room for it.”
The company has already rid itself of the products most Americans know, including its appliances, and last year, the light bulbs that GE had been making since the late 19th century when the company was founded.
The announcement Tuesday marks the apogee of those efforts, divvying up an empire created in the 1980s under CEO Jack Welch.
GE’s stock became one of the most sought after on Wall Street under Welch, and the company’s value increased 30-fold.
Yet the stock began to lag in the summer of 2001, the waning days of Welch’s rule. As the decade came to a close GE was struck by near ruin with the arrival of the worst financial crisis since the Great Depression. General Electric’s vulnerabilities were laid bare and the epicenter was GE Capital, the company’s financial wing.
Under the reorganization, GE’s aviation unit, it’s most profitable, will keep General Electric in the name.
GE will spin off its health care business in early 2023 and its energy segment including renewable energy, power and digital operations in early 2024.
The decision to split at GE was well received Tuesday, both in general markets and by those who had pushed for the change.
“The strategic rationale is clear: three well-capitalized, industry leading public companies, each with deeper operational focus and accountability, greater strategic flexibility and tailored capital allocation decisions,” wrote Trian Fund Management, a large stakeholder whose founding partner serves on GE’s board.