General Electric shares rise 6% after structuring its business into 3 independent companies

  • 09 November, 2021
  • 6:13 pm EET

The shares of the American giant General Electric Company rose by about 6%, on Tuesday evening, hours after announcing its plan to split into 3 companies, after years of poor performance of its shares and the accumulation of debts.

The company will be divided into separate units focused on aviation, health care and energy, with the capital structures of the new companies to be announced at a later time, according to the American “CNBC” network.


3 Independent Companies

General Electric indicated – in a statement issued – that it intends to establish a tax-free healthcare company in early 2023, and expects to retain a 19.9% ​​stake in it.

It added that it will combine renewable energy, energy and digital business units into one company, to be in a position to lead the energy transition, and then seek tax relief from this business in early 2024.

She emphasized that after these transactions, General Electric will be a company focused on aviation and shaping the future of aviation.


Better Service

“We put our technical expertise, leadership and global reach to work to better serve our customers,” said the company’s CEO, Lawrence Kolb.

“By creating 3 global industry-leading public companies, each can benefit from greater focus, proportional capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors and employees,” he added.

The company said the GE name will continue with the airline after the transition is complete, and Kolb will continue to lead that unit.

She added that Scott Strazik will head the Renewable Energy, Energy and Digital Business unit, while Peter Ardwini will head the healthcare unit.


Company History

General Electric was co-founded by Thomas Edison in the late 19th century, and the company went through many transformations over the past century as the American economy changed, becoming a leader in appliances, jet engines, and electric turbines.

The group expanded rapidly in the 1980s under the late Jack Welch, delving into financial services and returning to live broadcasting with the purchase of NBC, generating enviable profit growth and returns for investors along the way.

GE had stints as the largest company by market capitalization as recently as the early 2000s, but then the financial crisis hit, according to CNBC.


Declining Performance..And Accumulating Debt

The weight of its faltering financial arm, GE was never able to climb back to the top under Welch’s successor, Jeff Immelt.

Stocks exited the Dow Jones Industrial Average in 2018, having been one of the original members of the index that dates back to 1896.

Despite the recent outperformance, GE shares have underperformed poorly in the market over the past two decades.

The stock has lost 2% annually since 2009, compared to an annual return of 9% for the S&P 500.

The company has been plagued by high levels of debt in recent years that have raised doubts on Wall Street, and GE has said it will use the proceeds from the recent sale of its aviation finance unit to pay off the debt.





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