General Electric (GE) has announced its plans to form a tax-free spin-off of GE Healthcare to create a standalone company focused on precision health, in early 2023.
The move is part of its decision to form three independent public companies focused on the aviation, healthcare and energy sectors, said the company.
GE is expected to incur around $2bn in one-time separation, transition, and operational costs, and less than $500m in tax costs, subject to particulars of the transaction.
Upon completion of the tax-free spin-off, GE chairman and CEO H Lawrence Culp Jr. will serve as non-executive chairman of GE Healthcare.
Culp said: “At GE we have always taken immense pride in our purpose of building a world that works. The world demands, and deserves, we bring our best to solve the biggest challenges in flight, healthcare, and energy.
“By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees.
“We are putting our technology expertise, leadership, and global reach to work to better serve our customers.”
GE intends to use proceeds from recently closed GECAS transaction to reduce its debt in the future, in addition to its strategic capital deployment efforts.
The company aims to reduce a gross debt of more than $75bn by the end of 2021.
The transaction is subject to satisfaction of certain customary conditions, including final approvals by GE’s Board of Directors, and completion of financing.
Paul, Weiss, Rifkind, Wharton & Garrison is serving as lead legal counsel, and Evercore and PJT Partners as lead financial advisors to GE on the transaction.
Also, the company has received legal advice from Gibson, Dunn & Crutcher and financial advice from BofA Securities and Goldman Sachs.
Culp added: “Today is a defining moment for GE, and we are ready. Our teams have done exceptional work strengthening our financial position and operating performance, all while deepening our culture of continuous improvement and lean.
“We have a responsibility to move with speed to shape the future of flight, deliver precision health, and lead the energy transition.
“The momentum we have built puts us in a position of strength to take this exciting next step in GE’s transformation and realize the full potential of each of our businesses.”
