March 24, 2019

GE sells biopharma unit for $21 billion

27 February 2019, 04:22 | Silvia Roy

General Electric Stock Is Soaring and Analysts Are Backing It Up

GE sells off BioPharma business to Danaher for $21.4B

This morning, General Electric announced that it has reached a "definitive agreement" to sell its BioPharma business to Danaher - GE's CEO's old shop - and GE will receive $21.4 billion in return.

The biopharma business, part of its life sciences unit, generated revenue of about $3 billion in 2018.

Shares of GE jumped 11 percent before the opening bell Monday.

The sell-off throws cold water on the giant's plans to spin out GE Healthcare through an IPO, Culp said in a Monday interview with Bloomberg. And in defense of Culp, who has been touted by many analysts as a great turnaround CEO for GE, GE shares rose by 6.4% to $10.82.

That business includes contrast media and molecular imaging supplies for radiology and, according to GE, is highly complementary to its medical imaging business.

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Pharmaceutical Diagnostics, now part of GE Life Sciences, will remain within the GE Healthcare portfolio.

"Today's transaction is a pivotal milestone", Culp said in a statement published by CNN Business. GE is expected to report its 2019 outlook at an earnings call scheduled on March 14.

"[Culp] has earned his stripes", William Blair & Co analyst Nicholas Heymann said, noting that "Danaher is paying GE is two times our expectations". The firm's Kevin Huang believes this reflects strong momentum and his positive view of the news to acquire GE's biotechnology instrument division for $21 billion in cash.

GE Healthcare has a global installed base of more than 4 million imaging, mobile diagnostic and monitoring units.

The purchase is also the biggest yet for Danaher, which has a history of deal-making, and half of its revenue has come from companies it has acquired in the past seven years.

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We think this is a natural fit for Danaher's existing business, and both eliminates a major competitor in this business and creates a wide moat and gap between DHR and other competitors.

The company, which has been shrinking dramatically in recent years, cited changes in its portfolio and operating model.

"A more focused portfolio is the right structure for GE, and we have many options for maximising shareholder value along the way", Culp said. GE will get some $20 billion in net proceeds, which it will use to pare debt, which stood at $121 billion at the end of December.

In the transaction, GE received approximately $2.9 billion in cash as well as shares of Wabtec common stock and Wabtec non-voting convertible preferred stock that, together, represent an approximately 24.9 per cent ownership interest in Wabtec. It includes instruments, supplies and software for the goal of research, discovery, process development and manufacturing workflows of biopharmaceutical drugs. "It's unlikely we would do something here in the near to medium term", Culp said.

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