GE will spin off its healthcare unit as an independent company in early 2023.
GE Healthcare expects growth, optimistic about spin off of healthcare division
March 15, 2022
by John R. Fischer, Senior Reporter
GE Healthcare still expects to see high single-digit growth and $5.5-$6.5 billion in free cash flow in 2022 prior to the spin off of its healthcare unit and restructuring of its company.
At its 2022 Investor Day meeting on March 10, the tech company said it predicts organic revenue growth and an organic expansion of over 150 basis points and adjusted earnings per share (EPS) of $2.80 to $3.50. It also expects to make over $7 billion in free cash flow in 2023.
The meeting is the last one before the planned spin off of GE Healthcare in early 2023. The company plans to create three independent companies that will focus on global demands for precision health, renewable energy and aviation, respectively.
“As strong, customer-centric businesses, each will benefit from greater accountability, team alignment and capital allocation flexibility to enable a more sustainable, healthier and connected future,” said GE chairman and CEO Larry Culp during the presentation, which was held at GE’s Power and Aviation facilities in Greenville, South Carolina.
GE Healthcare serves more than one billion patients and facilitates over two billion procedures annually. It has installed more than four million medical solutions worldwide and made $18 billion in revenue in 2020.
The company announced its intention to spin off its healthcare unit in 2018 in an effort to focus on power, aviation and renewable energy divisions and to simplify its business, reduce debt and improve its share price. It also spun off its train manufacturing business that year, as well as its distributed power division in a $3.3 billion sale.
It reaffirmed its intention in November to make the healthcare unit a separate entity and said it would focus on lean fundamentals to better serve providers and patients and improve operations. The decision marks the end of the conglomerate’s 129 years as a whole company. It also said back then that it predicted having high-single-digit free cash flow margins in 2023.
As a newly independent business, GE Healthcare will focus on precision health and be led by newly appointed president and CEO Peter Arduini. Culp will serve as a non-executive chairman of the company following its spin-off.
GE will still retain a 19.9% stake in the business. It expects to pay a one-time charge of $2 billion for the separation, as well as operational and tax costs of less than $500 million.
Following this spinoff, the same will be done to GE Renewable Energy in early 2024, which will allow the original company to focus solely on aviation. The creation of three separate companies is expected to bring long-term growth, deeper operation focus, greater accountability, more strategic and financial flexibility and distinct investment profiles for each segment.
GE Healthcare is expected to be more nimble and better able to adapt to changes in its markets. It sees great potential in its fast-growing, diagnostic imaging equipment market due to the growing influence of AI and more competition from startups and established players. It also says it will be better able to address the needs of aging populations, access to healthcare services in emerging economies, development of new technologies and the challenges of the ongoing COVID-19 pandemic.
“GE Healthcare will be more nimble because they are no longer hostage to the complexity of decision-making that comes with a company like GE,” Michael Abrams, managing partner of health consulting firm Numerof & Associates, told The Wall Street Journal in November.
Additionally, as a stand-alone company, GE Healthcare will be able to move faster and have more capital to acquire companies and technologies. Just last year it acquired BK Medical, an advanced surgical visualization company whose technology helps clinicians see inside a patient’s body in real time during surgery, for $1.45 billion.
GE has made a number of changes over the years to streamline operations, cut overhead costs, and facilitate faster collections from customers. This allowed it to reduce its gross debt by over $75 billion by the end of 2021 and reduce its net-debt-to-EBITDA ratio to less than 2.5 times in 2023.
GE is the world leader in the global market for medical imaging, which was worth around $22 billion in sales in 2020, according to Signify Research. It holds around a 26% share here, compared to Siemens’ 21% and Philips’ 17% stakes. GE Healthcare accounted for about 23% of the whole company’s $79.6 billion in revenue in 2020, making it the most profitable division.
At its 2022 Investor Day meeting on March 10, the tech company said it predicts organic revenue growth and an organic expansion of over 150 basis points and adjusted earnings per share (EPS) of $2.80 to $3.50. It also expects to make over $7 billion in free cash flow in 2023.
The meeting is the last one before the planned spin off of GE Healthcare in early 2023. The company plans to create three independent companies that will focus on global demands for precision health, renewable energy and aviation, respectively.
“As strong, customer-centric businesses, each will benefit from greater accountability, team alignment and capital allocation flexibility to enable a more sustainable, healthier and connected future,” said GE chairman and CEO Larry Culp during the presentation, which was held at GE’s Power and Aviation facilities in Greenville, South Carolina.
GE Healthcare serves more than one billion patients and facilitates over two billion procedures annually. It has installed more than four million medical solutions worldwide and made $18 billion in revenue in 2020.
The company announced its intention to spin off its healthcare unit in 2018 in an effort to focus on power, aviation and renewable energy divisions and to simplify its business, reduce debt and improve its share price. It also spun off its train manufacturing business that year, as well as its distributed power division in a $3.3 billion sale.
It reaffirmed its intention in November to make the healthcare unit a separate entity and said it would focus on lean fundamentals to better serve providers and patients and improve operations. The decision marks the end of the conglomerate’s 129 years as a whole company. It also said back then that it predicted having high-single-digit free cash flow margins in 2023.
As a newly independent business, GE Healthcare will focus on precision health and be led by newly appointed president and CEO Peter Arduini. Culp will serve as a non-executive chairman of the company following its spin-off.
GE will still retain a 19.9% stake in the business. It expects to pay a one-time charge of $2 billion for the separation, as well as operational and tax costs of less than $500 million.
Following this spinoff, the same will be done to GE Renewable Energy in early 2024, which will allow the original company to focus solely on aviation. The creation of three separate companies is expected to bring long-term growth, deeper operation focus, greater accountability, more strategic and financial flexibility and distinct investment profiles for each segment.
GE Healthcare is expected to be more nimble and better able to adapt to changes in its markets. It sees great potential in its fast-growing, diagnostic imaging equipment market due to the growing influence of AI and more competition from startups and established players. It also says it will be better able to address the needs of aging populations, access to healthcare services in emerging economies, development of new technologies and the challenges of the ongoing COVID-19 pandemic.
“GE Healthcare will be more nimble because they are no longer hostage to the complexity of decision-making that comes with a company like GE,” Michael Abrams, managing partner of health consulting firm Numerof & Associates, told The Wall Street Journal in November.
Additionally, as a stand-alone company, GE Healthcare will be able to move faster and have more capital to acquire companies and technologies. Just last year it acquired BK Medical, an advanced surgical visualization company whose technology helps clinicians see inside a patient’s body in real time during surgery, for $1.45 billion.
GE has made a number of changes over the years to streamline operations, cut overhead costs, and facilitate faster collections from customers. This allowed it to reduce its gross debt by over $75 billion by the end of 2021 and reduce its net-debt-to-EBITDA ratio to less than 2.5 times in 2023.
GE is the world leader in the global market for medical imaging, which was worth around $22 billion in sales in 2020, according to Signify Research. It holds around a 26% share here, compared to Siemens’ 21% and Philips’ 17% stakes. GE Healthcare accounted for about 23% of the whole company’s $79.6 billion in revenue in 2020, making it the most profitable division.