UPDATE 1: GE Successfully Completes Three-Way Split, Departing From Historic Legacy

UPDATE 1: GE Successfully Completes Three-Way Split, Departing From Historic Legacy

(Rewrites first paragraph, adds stock price in paragraph 4, analyst quote in paragraph 15, general details throughout)

By Rajesh Kumar Singh and Abhijith Ganapavaram

CHICAGO, April 2 (Reuters) – General Electric completed its split into three companies on Tuesday, marking the end of the 132-year-old conglomerate that was once the most valuable U.S. company and a global symbol of American business power.

The industrial giant’s aerospace and energy businesses began trading on the New York Stock Exchange as separate entities more than a year after GE spun off its health care business.

GE Aerospace retained the GE symbol. GE energy unit Vernova debuted under the symbol GEV.

Shares of GE Aerospace were up about 2% in mid-afternoon trading. Vernova increased by around 5%.

The split marks the culmination of CEO Larry Culp’s efforts to turn around a company that seemed all but dead due to bad investments and the 2008 financial crisis that nearly bankrupted its most profitable business, GE Capital.

When Culp, the first outsider to lead GE, took over in 2018, the company was struggling with low profits and a mountain of debt. Its stock had fallen nearly 80% from 2000 highs and lost its place in the Dow Jones Industrial Average after more than a century on the blue-chip stock index. The uproar prompted GE’s board to oust two of his predecessors in less than two years.

Culp’s task to save the struggling conglomerate became more difficult when its lucrative jet engine business fell victim to the coronavirus pandemic as global air travel dried up. However, its focus on paying down debt by selling assets and improving cash flow by streamlining operations and reducing overhead marked the start of a recovery.

GE has reduced more than $100 billion in debt and quadrupled its free cash flow since 2018. Its market capitalization has increased by about $100 billion to $192 billion.

“With the successful launch of three independent public companies now complete, today marks a final historic milestone in GE’s multi-year transformation,” Culp said Tuesday.

Culp, as CEO of GE Aerospace, rang the opening bell for the NYSE on Tuesday, alongside Vernova CEO Scott Strazik.

GE was formed in 1892 after famous inventor Thomas Alva Edison merged Edison General Electric Co with a rival. Over the next few years, it touched every aspect of life, from the provision of electricity to the sale of appliances to the financing of mortgages.

After the split, it will be left with its aerospace business, which makes engines for Boeing and Airbus planes and generates more than 70% of its revenue from services.

Analysts estimate GE Aerospace’s market value at more than $100 billion after the split. It is benefiting from strong demand for after-sales services as aircraft delivery delays by Boeing and Airbus force airlines to keep older planes flying longer.

Last month, it forecast operating profit of around $10 billion in 2028.

“We expect the flywheel of GE Aerospace’s engines business to generate decades of profitable growth,” Nicolas Owens, an equity analyst at Morningstar, wrote in a note. (Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; editing by Arun Koyyur and Richard Chang)

Source Reference

Latest stories