GE to sell biopharma business to Danaher for $21.4 bln

World
Europe

General Electric said on Monday it would sell its biopharma business to Danaher Corp. for 21.4 billion U.S. dollars in the biggest strategy reversal since Lawrence Culp took over as the industrial conglomerate’s chief executive in September.

GE rejected an approach by Danaher for that business a year ago. But its stance changed after Culp was appointed CEO and GE board became more open to a deal, according to people familiar with the negotiations who requested anonymity to discuss them.

As a result, GE will receive some 20 billion U.S. dollars in net proceeds which it will use to trim its debt pile, which stood at 121 billion U.S. dollars at the end of December.

Both GE's and Danaher's shares jumped on news of the deal, though GE still faces significant hurdles in recovering its former corporate glory. It lost two-thirds of its market value in the last two years amid a series of operational and investment missteps.

Lawrence Culp, chairman and CEO of General Electric (GE). /VCG Photo

"(The GE-Danaher deal) unfortunately doesn't solve the real issues which come back to power. That's what took the stock down, and that's still going to take some time play out,” said Richard Grasfeder, a portfolio manager at Boston Private Wealth LLC, which held about 478,204 shares in GE as of the end of 2018, down from 787,600 shares a year earlier.

Culp said on Monday the sale to Danaher, where he was instrumental in revitalizing the company as its CEO, was a pivotal milestone in efforts to turn around GE, a 126-year-old conglomerate.

"It demonstrates that we are executing on our strategy by taking thoughtful and deliberate action to reduce leverage and strengthen our balance sheet,” Culp said in a statement.

The biopharma sale also propelled a broad rally in GE's roughly 120 billion U.S. dollars of bonds, which had taken a pounding in late 2018 as it became clear that earlier restructuring efforts were falling short and that the company would need to take more aggressive action to address its debt load in particular.

Source(s): Reuters