GE Soars After Announcing Plan To Split Into 3 Separate Companies

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by Tyler Durden
Tuesday, Nov 09, 2021 - 07:08 AM

Roughly 3.5 years after being booted from the Dow, GE announced Tuesday that it will split into three companies after years of activist shareholders pushing for structural changes as its stock has perennially lagged the market.

The split will create three separate companies focused on aviation, health care and energy. The health-care unit should be separated by early 2023, while the separation of a company combining GE's renewable energy and GE power units is expected to be finished by 2024. What remains will be the GE Aviation unit.

News of the split has sent GE shares soaring nearly 20% in premarket trade.

Spinoffs are hardly a new thing for GE, which has been shrinking since the financial crisis.

The GE name will live on with the aviation unit, which will continue to be led by GE CEO Larry Culp. Originally, GE was founded in the late 1800s by Thomas Edison and endured several transformations over the last century, changing alongside the constantly-growing and shifting American economy.

It was best known for being a leader in home appliances, jet engines and power turbines. The conglomerate expanded rapidly back in the 1980s under the late former CEO Jack Welch, buying up NBC and getting into the financial services business with GE Capital.

At several points in history, GE was the largest company in the US by market value. Its last stint at the top occurred in the early-2000s.

But a reckoning arrived with the financial crisis, which caused GE's troubled financial arm to hurt the rest of the company under then-CEO Jeff Immelt. A decade later, GE was dumped from the Dow, despite being one of the blue-chip index's original members. GE's debt issues and capital structure has led to skepticism from Wall Street. The company says it will use proceeds from the recent sale of its aviation financing unit to pay down this debt. Shares have been steadily climbing since the start of this year, but still, FactSet data shows shares have lost 2% annually since 2009, vs. a 9% annual return for the S&P 500.