Home > Boards > Free Zone > User's Groups > Awesome Stocks

>>> GE Deal With Danaher Shows Culp Is

Public Reply | Private Reply | Keep | Last ReadPost New MsgNext 10 | Previous | Next
gfp927z Member Profile
Followed By 64
Posts 24,390
Boards Moderated 74
Alias Born 03/22/05
160x600 placeholder
Four-Woman Group That Fought U.K. Algorithms Steps Up for Tech-Worker Rights
LONDON -- A four-woman technology-advocacy group that forced the British government to scrap a controversial algorithm for processing visas and led a public backlash over a tool for predicting high-school grades now is taking on Facebook Inc. and Uber Technologies Inc. over worker rights.
CEOs Can't Avoid Politics, Says Pernod Ricard Executive: 'We Are All in the Fray'
Zack Snyder's 'Army of the Dead' and Other Netflix Movies Turn Up in Theaters
Former Apple Engineer Accuses Company of Defamatory Statements Over Dismissal
Vivendi: Procedures for Obtaining or Consulting Information on the Combined General Shareholders' Meeting to be Held on June ...
Walmart to Stop Requiring Masks for Vaccinated Workers and Shoppers -- 2nd Update
Top Company News of the Day
PNC Receives Regulatory Approval to Acquire BBVA USA
McDonald's, Tesla, Disney: Stocks That Defined the Week
Hertz Gets Court Approval for Bankruptcy Deal With Top Bidders -- Update
Correction to Amazon 75,000 Workers Article on May 13
Walmart to Stop Requiring Masks for Vaccinated Workers and Shoppers -- Update
Top Stories of the Day
Walmart to Stop Requiring Masks for Vaccinated Workers and Shoppers
IPO Market Faces a Critical Juncture
Stocks Rebound but Suffer Weekly Losses
Hertz Gets Court Approval for Bankruptcy Deal With Top Bidders Knighthead and Certares
Why the CDC Told Fully Vaccinated Americans They Didn't Need to Wear Face Masks Anymore
Matt Gaetz Associate Joel Greenberg Set to Plead Guilty to Sex Trafficking
Bank of America Reaches Tentative $75 Million Settlement in Excessive Fees Case, Reuters Reports
Stock Gains Accelerate in Afternoon Trading
gfp927z   Monday, 02/25/19 12:35:48 PM
Re: None
Post # of 32 
>>> GE Deal With Danaher Shows Culp Is All About the Balance Sheet

The sale of its biopharmaceutical business indicates creditors are the CEO’s top priority.


By Brooke Sutherland

February 25, 2019


All about the balance sheet.

General Electric Co.’s latest deal shows that CEO Larry Culp is putting creditors in the driver’s seat, and shareholders can come along for the ride for now.

GE announced on Monday that it’s selling its biopharmaceutical business to Danaher Corp. for $21 billion in cash plus the assumption of $400 million in pension obligations. The deal has a bit of intrigue — Culp spent 13 years as Danaher’s CEO — but it’s a huge step forward in his push to attack GE’s bloated balance sheet and reduce one of the largest unfunded pension balances in the S&P 500 Index. The biopharmaceutical business makes up the bulk of GE’s life-sciences operations, which were the most attractive part of the health-care division it had planned to take public. As such, Culp is putting those IPO plans on ice for now and will contemplate other options for its core imaging business. Taken together, it’s clear that GE’s creditors, rather than its stockholders, are Culp’s top priority.

Long Way to Go

GE shares spiked more than 15 percent in early trading on Monday as shareholders cheered the influx of cash to address the company's balance sheet woes. That only gets the stock back to where it was in October, though.

Recall that Danaher reportedly expressed interest in the life sciences operations in early 2018, but GE, led by John Flannery at the time, rebuffed its overtures. Flannery tried to juggle an obvious need to reduce GE’s leverage with an effort to conserve upside for aggrieved equity investors. Culp has torn up that blueprint to refocus the company’s divestiture drive on raising cash. Flannery was hesitant to pull the trigger on a wind-down of GE’s stake in the Baker Hughes energy business; Culp kick-started the sale just six weeks into his role as CEO. Flannery structured the merger of GE’s transportation unit with Wabtec Corp. to give GE shareholders a bigger stake in the combined entity than the company itself; Culp rejiggered that deal at the 11th hour to raise more cash to tend to the balance sheet. Flannery planned to spin off 80 percent of GE’s health-care business to shareholders; the life sciences deal with Danaher gives nothing to shareholders directly and it seems likely that any future divestiture of the remaining health-care operations will also be focused on raising cash, rather than providing shareholders with an ongoing interest.

It’s a bitter pill, and GE’s decision to sell some of its better assets for cash speaks to the depth of the challenges it faces in its power unit and GE Capital financial arm. I don’t think Culp would be doing this if he thought GE could just muddle through another few years of power losses. Time is not on his side; more than three-quarters of business economists expect the U.S. to enter a recession by the end of 2021, according to a semiannual National Association for Business Economics survey released Monday. A downturn is likely to undermine the aviation unit that has been GE’s primary savior throughout its recent struggles. The benefit of scrapping the health-care IPO for now is that GE gets to milk the cash flow from that business awhile longer. Notably, GE said it would at long last release its outlook for 2019 on March 14 and also booked a March 7 date for a presentation focused solely on its long-term care insurance liabilities. That suggests the additional detail on the insurance business that GE has promised to provide in its 10K annual filing is likely to be complicated and seemingly ugly.

While the balance between bond and equity holders is always tricky, I think Culp is doing the right thing by putting creditors first. These are hardly the actions of a company operating from a position of strength, but it’s the most logical path. And at this point, GE’s stock price is so contingent on what happens with the balance sheet that you could argue the interests of bond and equity holders are aligned for the time being. That’s why I have advocated in the past for an equity raise to put those leverage concerns to rest once and for all. The life-sciences deal and delayed divestiture of the remaining imaging business most likely mitigates any imminent need for a share sale. But you still have to wonder what GE is going to look like once Culp is finished and what its growth story will be. The health-care business was one of GE’s better cash-generating assets and, one way or another, it likely will be gone eventually. GE risks following the path of fallen industrial giants before it like Tyco International or Westinghouse and breaking itself up until it’s a shadow of its former self.


Public Reply | Private Reply | Keep | Last ReadPost New MsgNext 10 | Previous | Next
Follow Board Follow Board Keyboard Shortcuts Report TOS Violation
Current Price
Detailed Quote - Discussion Board
Intraday Chart
+/- to Watchlist
Consent Preferences