GE to Sell Biopharmaceutical Unit for $21.4 Billion

John Minchillo  Associated Press  File/2018

John Minchillo Associated Press File/2018

In 2018 this business, excluding biopharma, generated approximately $17 billion of revenue with mid-teens operating profit margins.

The BioPharma unit, which the industrial conglomerate intends to divest, represents part of GE Life Sciences, while it generated nearly $3 billion in revenue previous year.

The transaction is expected to be completed in the fourth quarter of calendar year 2019, and is subject to customary conditions, including receipt of applicable regulatory approvals.

GE stock leapt 15.5% in early Monday trading on the news and remains up 8.8% as of 11:40 a.m. EST. The bulk of proceeds have been pledged toward working down its debt, which at one point in late 2018 was roughly twice GE's market capitalization as its stock price plunged to a low of $6.66 a share in December. Culp, who took over as CEO on October 1 of past year, replacing John Flannery, in January said GE's strategy moving forward "is clear: de-leverage our balance sheet and strengthen our businesses, starting with Power".

Another analyst, Dan Brennan of the investment bank UBS, said it "looks like a great fit" for Danaher, particularly given how it fits with a previous acquisition of Pall, he wrote in a February 25 note to investors. "But its stance changed after Culp was appointed CEO and GE's board became more open to a deal, according to people familiar with the negotiations who requested anonymity to discuss them", Reuters' Ajmera and Mishra write.

GE also announced several upcoming events, including the release of its 10-K annual report this week and a presentation by Culp at a JPMorgan Chase & Co. conference March 5.

Pharmaceutical Diagnostics, now part of GE Life Sciences, will remain within the GE Healthcare portfolio.

"IPO of healthcare was Plan A - but we got lots of inbound calls about this business and this [sale] is clearly a superior path", Culp told CNBC.

Danaher's President and CEO, Thomas P. Joyce, Jr., said, "GE Biopharma is renowned for providing best-in-class bioprocessing technologies and solutions".

GE is considerably smaller now than it was before becoming entangled in the financial crisis a decade ago and wants to divest even more of its businesses. The firm is positive on the deal as it transforms Danaher's life sciences business.

The deal's inclusion of some GE pension liabilities will be welcome news to investors.

Danaher expects to finance the all-cash transaction with approximately $3 billion of proceeds from an equity offering (which may include an offering of mandatory convertible preferred shares), and the remainder from available cash on hand and proceeds from the issuance of debt and/or new credit facilities. 'So folks don't look at us like a desperate seller, ' he said. GE completed the transportation deal Monday as it merged the locomotive unit with Wabtec Corp.

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