GE to spin off health business

(Bloomberg) -- General Electric Co. plans to spin off its health-care business and divest its stake in oilfield-services provider Baker Hughes as Chief Executive Officer John Flannery focuses the struggling company on power, aviation and renewable energy.

GE also will seek to reduce net debt by about $25 billion by 2020, the Boston-based company said in a statement Tuesday, concluding a yearlong strategic review. GE will sell 20 percent of the health business and spin off the rest to its shareholders, while the stake in Baker Hughes will be sold over the next two to three years. GE shares rose 3.9 percent to $13.25 in pre-market trading.

The moves continue a radical reshaping of GE, which bears little resemblance to the conglomerate that used to count NBC, home-appliances, plastics and a sprawling finance unit among its business holdings. In recent years, former CEO Jeffrey Immelt sold most of GE’s banking and consumer operations, while Flannery has already agreed to unload the century-old locomotive operations.

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“GE will be a focused high-tech industrial company that will be easier for investors to follow and measure with a significantly improved balance sheet to support its remaining businesses,” the manufacturer said in the statement.

The company will host a call with investors at 8:30 a.m. New York time to discuss the changes.

GE said it would maintain its dividend through the health spinoff. After that, the company “expects to adjust the GE dividend with a target dividend policy in line with industrial peers.” The health business makes imaging machines and other hospital equipment.

Investors have so far been cool to the new CEO’s preliminary turnaround efforts, including cost cuts, management changes and internal restructuring. The shares fell 27 percent this year through Monday, following a 45 percent decline last year -- a slump that led overseers of the Dow Jones Industrial Average to kick GE out of the blue-chip index it had been in for more than 100 years.

GE, an icon of American industry, has struggled to rebound from the financial crisis of 2008-2009. The stock has plunged from a peak of $60 in 2000 and the company cut its dividend in 2009 and 2017.

GE plans to “materially shrink” the balance sheet of its finance arm, GE Capital, aiming to sell $25 billion in energy and industrial finance assets by 2020. The company also is exploring options to reduce its insurance exposure. GE shocked investors this year with a $15 billion shortfall in insurance reserves.