General Electric (GE) Spin-off Notes
November 12, 2021 Update
On November 9, 2021, General Electric (GE) announced its plans to split into three companies: One focused on healthcare, another devoted to energy and power, and the third dealing with aviation. The healthcare spinoff is slated for 2023, and GE plans to retain a 19.9% stake. The spinoff of the power business is planned for 2024. Investors were happy with the news as the stock shot up more than 5% to roughly $114. GE CEO Larry Culp says, “Greater focus and accountability will come from this structure.” He sees benefits from the move in terms of capital allocation and talent retention in each business, as well as gains for GE’s customers. The hope is, from the CEO’s perspective, that down the road, all three companies are targeting investment-grade credit ratings by continuing to deleverage. I think the spin-off will unlock value (Wall Street loves simplicity), but there’s really nothing actionable to do today as the first spin-off won’t take place until 2023. As such, I think GE will be in “spin-off purgatory” for the foreseeable future.