GE Healthcare was supposed to be heading for an initial public offering (IPO) this year, but that looks less likely after a $21.4 billion buyout offer for its biopharma unit from medtech company Danaher.
Shares of GE jumped 15.1 per cent to $11.71 in early trading, while Danaher gained 8.5 per cent to $123.08.
Danaher is expected to pay the bulk of the sum, $21bn, in cash, with the deal expected to close in the fourth quarter of 2019.
GE, which rejected an approach by Danaher for the business a year ago, said its stance changed after Culp was appointed CEO and GE board became more open to a deal, reports citing close to the negotiations said.
"This news meaningfully accelerates our deleveraging plan", Culp, who ran Danaher for more than a decade until 2014, said in an interview. The sale could give GE a big advantage in addressing its liquidity problems.
GE also said that weakness in the GE Power unit meant it would miss its 2018 free cash flow and earnings guidance target, with the company taking a $23 billion goodwill charge to the Power division.
GE bonds' broad underperformance past year, when they skidded by around 14 percent, weighed heavily on the US corporate bond market overall.
As of March 2015, Culp owned 2.4 million shares of Danaher.
Pharmaceutical Diagnostics, now part of GE Life Sciences, will remain within the GE Healthcare portfolio.
"'The business will be established as a stand-alone operating company within Danaher's $6.5 billion Life Sciences segment so no integration with Pall, ' a spokesperson told us, adding 'the businesses are very complementary, so no divestitures expected, '" Stanton continues.
GE also today announced the completion of the spin-off and subsequent merger of its transportation business with Wabtec Corporation.
While GE may still unload the remaining health operations at some point, the company will now turn its attention to completing the bio-pharma sale, Culp said. "To do this, we are improving execution, customer focus, and how we set priorities across GE". The deal with Danaher will leave GE with a health-care business generating about $17 billion in annual sales.
The biopharma unit makes equipment for manufacturing biotechnology and drug therapies. The CEO explained that their strategy would be reducing leverage and ultimately strengthen the 128-year old company's bottom line.
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.