Veritas Capital is buying GE's health care tech unit for $1 billion, the firms announced today.
“Veritas Capital has significant knowledge and expertise in the health care IT space, and by operating as a stand-alone business under Veritas’ ownership, we now have the opportunity to further revitalize our product portfolio and pursue complementary acquisitions,” said Jon Zimmerman, vice president and general manager of Value-Based Care Solutions at GE Healthcare. The move will allow, he added, additional support and resources to go toward “deepening our commitment and capabilities to help health care providers manage their financial, clinical, and employee workflows across the continuum of care.”
The $1.05 billion cash deal includes GE's Enterprise Financial Management (Revenue-Cycle, Centricity Business), Ambulatory Care Management (Centricity Practice Solution) and Workforce Management (formerly API Healthcare) assets, which make up the Value-Based Care Division.
Calling the opportunity in the $9 billion market “tremendous,” Veritas Capital's CEO and Managing Partner Ramzi Musallam noted that this deal was a corporate carve-out, like earlier health care tech buys.
These buys included recent investments in Truven Health Analytics and Verscend Technologies.
“We’re confident this business will flourish under Veritas Capital, while GE Healthcare will continue to significantly invest in core digital solutions, such as smart diagnostics, connected devices, AI and enterprise imaging, that will drive precision health for our customers,” said GE Healthcare's president & CEO Kieran Murphy.
The deal is set to close in third-quarter 2018.
Rumors of a possible health care IT deal
swirled around GE in October, 2016,
CNBC, The Wall Street Journal, Reuters and others are reporting unnamed sources who have confided that “exploration” into the matter was ongoing.
In addition to IT, the entire GE Healthcare enterprise includes magnetic imaging, medical diagnostics and drug discovery, and had a 2016 annual revenue of $18.3 billion.
According to CNBC, in February, GE reported it had a "line of sight"
on assets worth $4 billion, that it could unload as part of its plan to fix its finances by selling $20 billion of assets.
Some analysts applauded the health care divestiture rumor, including over at The Motley Fool, where Lee Samaha provided three good reasons to favor it
“the technology crossover is less obvious with health care. In this sense, decoupling health care would help management truly focus on becoming a digital industrial company.
“cutting production costs and generating synergies in aviation, power, and oil and gas, have constituted the key operational focus of the company in recent years. However, the main aim of the health care segment in the past few years has been improving the organic growth rate.
“the market rewarded GE for the successful spinoff of its retail finance arm, Synchrony Financial, and the sale of GE capital assets. In other words, shareholders were rewarded when GE jettisoned non-core businesses.”
In June, 2017, when John Flannery was tapped to be GE CEO
, he called it, “the greatest honor of my career.”
“John is the right person to lead GE today,” said former CEO Jeff Immelt at that time, adding that he “led one of our most essential businesses.”
The succession plan had been in place for years, and for some on the street it was a welcome change.
"We are happy to have [this change] now," Barclays managing director Scott Davis told CNBC's Squawk Box about the change. "GE needed a new messenger."