Shares of General Electric Company (NYSE: GE) jumped about 10% in premarket trading on Tuesday after the U.S. industrial conglomerate said it will split up into three public companies.
The health segment to spin off as early as 2023
In its announcement this morning, GE said it will spin off its health segment by early 2023. The next in line to become a separate public entity would be its energy unit in early 2024. The third one will be a pure-play aviation company.
According to CEO Lawrence Culp, the split up is a step in the right direction for long-term growth. In his statement on Tuesday, he said:
By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees. We’re putting our tech expertise, leadership, and global reach to better serve our customers.
GE stock has struggled since the financial crisis of 2008
Since he took over the conglomerate in 2018, CEO Culp has separated or offloaded several segments to simplify GE’s business structure. After the split-up announced this morning, the name “General Electric” will remain with the aviation company that he’ll continue to lead.
Including the price action on Tuesday, the stock is now up about 40% this year. Nonetheless, its performance has been rather disappointing since the financial crisis of 2008, resulting in its removal from Dow Jones Industrial Average in 2018.
But the split up, General Electric is convinced, will help minimise debt and streamline its business to eventually revitalise the share price. The news comes more than a week after GE said its earnings and free cash flow exceeded expectations in the fiscal third quarter.
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