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GE flashes $ 21 billion biopharma sales to Danaher in U-turn under Culp

  FILE PHOTO: General Electric logo depicted on work helmets during a visit to General Electric offshore wind turbine factory in Montoir-de-Bretagne
FILE PHOTO: General Electric logo depicted on work helmets during a visit to the General Electric offshore wind turbine plant in Montoir-de-Brittany, near Saint Nazaire, west France, November 21, 2016. REUTERS / Stephane Mahe / File Photo

25. February 2019

By Ankit Ajmera and Manas Mishra

(Reuters) – On Monday, General Electric said it would sell its biopharma business to Danaher Corp for $ 21[ads1].4 billion in the biggest strategic reversal since Lawrence Culp took over industrial conglomerate CEO in September.

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

GE will therefore receive some $ 20 billion in net profits that it will use to trim its debt pool, which amounted to $ 121 billion at the end of December.

Both GE's and Danaher's shares jumped on the newsletter, although GE still faces significant barriers to restoring its former corporate world. It lost two-thirds of the market value over the past two years through a number of operational and investment errors.

Among the challenges are mismanagement of orders and operations in their power business and management of toxic long-term care insurance debt in the GE Capital arm.

"(the GE-Danaher agreement) unfortunately does not solve the real problems that come back to power, it was what took the stocks down and it will still take some time to play out," says Richard Grasfeder, portfolio manager at Boston Private Wealth LLC, which held approximately 478,204 shares in GE at the end of 2018, down from 787,600 shares a year earlier

On Monday, Culp said the sale to Danaher, where he helped revitalize the company as its CEO, was central milestone in the work of transforming GE, a 126-year-old conglomerate.

It demonstrates that we are implementing our strategy by taking thoughtful and awareness-raising measures to reduce influence and strengthen our balance, "Culp said in a statement.

Biofora sales also ran a broad rally in GE's about $ 120 billion of bonds, which had occurred at the end of 2018, when it became clear that previous restructuring work was shorter, and that the company had to take more aggressive measures to deal with. its debt burden in particular.

Larry Culp "eats his stripes. It is clear that no one in the job before he – John Flannery or Jeff Immelt – would have probably been able to pull off this transaction with Danaher," said William Blair & Co. analyst Nicholas Heymann.

"And the price Danaher pays GE is twice our expectations. This is a home run. It is really getting now for GE to raise liquidity considerations," Heymann said.

Until recently, the company had plans to spin the entire health care sector. However, Culp said in January that GE would sell almost half of the unit.

Sources familiar with the case told Reuters on Monday that GE will put the first public offer on the unit until the deal with Danaher closes, waiting in the second half of

This would mean that GE is likely to retain access to income and cash flows from the remaining healthcare providers for a long time, alleviating some cash concerns, even when power operations are struggling, said Rene Lipsch, leading GE analyst at Moody & # 39 ; p.


The purchase is also the largest yet for Danaher, who has a history of agreement, and half of the revenue has come from companies it has anchored affet the last seven years.

The agreement will expand Danaher's presence in the biopharma industry and give it access to drug research and development tools. Shares in the medical equipment machine rose more than 9 percent to a record $ 124.07.

Danaher expects to add 45 cents to 50 cents per share to the adjusted result in the first full year after the deal closes, and does not expect any "key" antitrust challenges.

"These are truly complementary businesses when you look at the product line's portfolio on the GE biopharma site and our site," said Danaher's CEO Thomas Joyce on a conversation with analysts. 19659004] The biopharma business accounted for 15 percent of GE's care income in 2018. It does instruments and software that support research and drug development.

The sale provides GE's health care with its medical device, making X-ray, CT scanning and MRI machines and its drug diagnostic unit.

The announcement also eased concerns about GE's solvency that had grown markedly last year reflected in an increase in the price of GE credit standard swaps (CDS) in the fourth quarter, a form of standard insurance. On Monday, GE's CDS prices dropped to their lowest since mid-October.

GE, which reported lower than expected fourth-quarter profit in January, is expected to give its 2019 views on a call on March 14. [19659019] (Reporting of Ankit Ajmera and additional reporting by Rachit Vats in Bengaluru and Dan Burns and Greg Roumeliotis in New York, editing of Saumyadeb Chakrabarty, Sweta Singh and Cynthia Osterman)

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