GE Healthcare is selling its BioPharma business to Danaher Corp. for $21.4bn, including $21bn cash as well as certain pension liabilities in a major deal set to provide GE with a much-needed cash injection.
The biopharma business, which sells chromatography hardware and consumables, cell culture media, single-use technologies, and development instrumentation accounted for 15% of GE Healthcare business revenue in 2018. According to GE, it is expected to generate $3.2bn in revenue this year and will join Danaher's Life Science as a stand-alone business. Pharmaceutical Diagnostics, currently part of GE Life Sciences, will remain within the GE Healthcare portfolio
"Today’s transaction is a pivotal milestone. It demonstrates that we are executing on our strategy by taking thoughtful and deliberate action to reduce leverage and strengthen our balance sheet," GE CEO and chairman H. Lawrence Culp explains in a press release. "We are retaining full flexibility for growth and strategic optionality with one of the world’s leading health-care companies, and we are pleased that our BioPharma colleagues will join a strong, established team at Danaher. A more focused portfolio is the right structure for GE, and we have many options for maximizing shareholder value along the way."
In an interview with CNBC, Culp said the Danaher deal means GE probably will not spin off the health-care business through an IPO as it had previously planned.
GE has slowly been dismantling as a conglomerate to chip away at a mountain of debt and plug a huge hole in its pension fund. In June 2018, GE announced plans to exit the health-care industry and make GE Healthcare a standalone company led by current GE Healthcare CEO Kieran Murphy. The process of transforming GE Healthcare into an independent business through an IPO was expected to take 12 to 18 months. The company also divested Baker Hughes, an oil and gas services company, and said it planned to focus on its aviation, power, and renewable energy businesses. (Also see "GE Spins Off Healthcare As Part Of Major Reorganization" - Medtech Insight, 26 Jun, 2018.)
When former Danaher head Culp took over as GE’s CEO in October, the company said the planned spin-off of the health-care business was still on track. (Also see "GE Healthcare Spinoff On Track Despite Leadership Change" - Medtech Insight, 1 Oct, 2018.) But now Culp believes the Danaher deal is a superior path to take to revitalize the company. The transaction is expected to close in Q4, 2019, subject to regulatory approvals and customary closing conditions.
Following the announcement of the deal with Danaher, Murphy said "The BioPharma business has been a strong contributor to our success, and I am confident this agreement represents a great opportunity for our valued colleagues to flourish under the ownership of Danaher. GE Healthcare has unsurpassed scale and scope and we will continue to focus on our investments so that we deliver better outcomes and more capacity to a world striving for Precision Health."
GE's share price jumped from $10.15 to $11.521 following announcement of the deal with Danaher, reflecting the market's enthusiasm for GE's plan to reduce its debt.
From the editors of Clinica