GE to Form Three Public Companies Focused on Aviation, Healthcare, and Energy

GE announced its plan to form three global public companies focused on aviation, healthcare, and energy, by:

1. Pursuing a tax-free spin-off of GE Healthcare, creating a pure-play precision health company in early 2023, in which GE expects to retain a stake of 19.9 percent
2. Combining GE Renewable Energy, GE Power, and GE Digital into one business, positioned to help accelerate energy transition, and then pursuing a tax-free spin-off of this business in early 2024
3. Following these transactions, GE will be an aviation-focused company focused on the future of flight

As independently run companies, the businesses will be better positioned to deliver long-term growth and create added value for customers, investors, and employees, with each leveraging:

• Deeper operational focus, accountability, and agility to better meet customer needs
• Tailored capital allocation decisions in line with distinct strategies and industry-specific dynamics
• Additional strategic and financial flexibility to pursue growth opportunities
• Dedicated boards of directors with deeper domain expertise
• An increased number of business- and industry-oriented career opportunities and incentives for employees
• More distinct and compelling investment profiles to appeal to broader, deeper investor bases

Meaningful Progress Enabling Next Step in GE’s Transformation

This plan builds on momentum that GE has built in recent years.

Stronger Financial Position

• More focused and de-risked through strategic portfolio actions, including the recent GECAS transaction, which results in a simpler, stronger, more focused high-tech industrial company
• Expecting to achieve greater than $75 billion of gross debt reduction from the end of 2018 through the end of 2021
• Stabilizing insurance and mitigated funding risks through capital contributions of $9.4 billion since 2018, investment portfolio actions, improving claims management, and premium increases
• Managing pension obligations with greater discipline, including funding $8.5 billion since 2018 and freezing most pension plans in the U.S. and U.K., and expecting that no further contributions will be needed through the end of the decade
• Strengthening liquidity and improving cash management, including eliminating on-book factoring, and today announcing plan to eliminate remainder of GE’s off-book factoring

Stronger Business and Operating Performance

• Implemented decentralized operating model by moving the center of gravity closer to customers, which enabled stronger customer relationships and operational improvement in GE’s nearly 30 P&Ls
• Scaled lean company-wide, driving performance improvements and culture change
• Improving operating performance in businesses to drive more consistent, sustainable free cash flow, while enhancing transparency and financial flexibility to reinvest in growth opportunities
• Strengthening leadership and governance with board refreshment, numerous leadership appointments, and auditor transition
• Emerging from COVID-19 headwinds, while improving cash generation, playing offense, and investing for growth

In today’s portfolio of businesses, GE is on track to reduce debt by more than $75 billion by the end of 2021 and is now on track to bring its net-debt-to-EBITDA ratio to less than 2.5x in 2023. GE will also continue to drive operating improvements for more sustainable profitable growth, and the company now expects to achieve high-single-digit free cash flow margins in 2023. As a result, GE is in a stronger position to execute this plan to form three well-capitalized, investment-grade companies. The company and its businesses will continue to serve GE’s partners and customers throughout this transition.

Management

Larry Culp will serve as non-executive chairman of the GE healthcare company upon its spin-off.  He will continue to serve as chairman and CEO of GE until the second spin-off, at which point, he will lead the GE aviation-focused company going forward.

Peter Arduini will assume the role of president and CEO of GE Healthcare effective January 1, 2022. Scott Strazik will be the CEO of the combined Renewable Energy, Power, and Digital business while John Slattery continues as CEO of Aviation.

Transaction Details

GE intends to execute the spin-offs of Healthcare in early 2023 and of the Renewable Energy and Power business in early 2024. The respective capital structures, brands, and leadership teams for each independent company will be determined and announced later. Where required to do so, GE will consult with employee representatives in line with its legal obligations before any final decisions are taken.

Through the transition, GE will be able to monetize its stakes in AerCap and Baker Hughes, prioritizing further debt reduction. Each of the three resulting independent companies will be well capitalized with investment-grade ratings.

Following the spin-off transactions, GE will retain the other assets and liabilities of GE today, including run-off insurance operations. Upon closing the Healthcare transaction, GE expects to retain a stake of 19.9 percent in the healthcare company to provide capital allocation flexibility. GE also intends that Healthcare will issue debt securities, the proceeds of which will be used to pay down outstanding GE debt. The transactions are not subject to bondholder consent.

The company expects to incur one-time separation, transition, and operational costs of approximately $2 billion and tax costs of less than $0.5 billion, which will depend on specifics of the transaction. The proposed spin-offs of Healthcare and the Renewable Energy and Power business are intended to be tax-free for GE and GE shareholders for U.S. federal income tax purposes.

The transactions are subject to the satisfaction of customary conditions, including final approvals by GE’s Board of Directors, private letter rulings from the Internal Revenue Service and/or tax opinions from counsel, the filing and effectiveness of Form 10 registration statements with the U.S. Securities and Exchange Commission, and satisfactory completion of financing.