"GE rejected an approach by Danaher for that business a year ago. It really turns the page now for GE to address liquidity concerns", Heymann adds.
GE jumped 18% to US$11.95 ahead of regular trading in NY yesterday. The shares have advanced 43 percent this year, the best performance on a Standard & Poor's sub-index of USA industrial companies.
GE also said that weakness in the GE Power unit meant it would miss its 2018 free cash flow and earnings guidance target, with the company taking a $23 billion goodwill charge to the Power division. The Boston-based manufacturer has been reeling from mounting debt, cash shortfalls and a deep slump in the market for gas turbines. With the shares up sharply in pre-market on the news, we think further upside over the next 12-months may be more muted, and likely in line with the overall market. "This stock reaction underscores the win-win nature of the deal".
The biopharmaceutical division has been performing well, accounting for about $3 billion of the $20 billion in revenue that G.E.'s health care unit generated past year as a whole.
The bio-pharma unit, which makes equipment for manufacturing biotechnology and drug therapies, represents about $3 billion of GE Healthcare's annual sales. The deal is expected to close in the fourth quarter of 2019 and we see limited regulatory risk.
GE will sell the division to Danaher for $21.4 billion, the companies announced.
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"GE Biopharma is renowned for providing best-in-class bioprocessing technologies and solutions", said Danaher CEO Tom Joyce. GE isn't planning other big sales, he said.
The biopharmaceutical business makes up most of GE's life-sciences operations. On Monday, GE's CDS prices sank to their lowest since mid-October.
We think this is a natural fit for Danaher's existing business, and both eliminates a major competitor in this business and creates a wide moat and gap between DHR and other competitors. "So folks don't look at us like a desperate seller", he said.
Danaher has refocused on health care after spinning out Fortive Corp.in 2016, shedding its industrial business arm. In 2016, for instance, it bought the molecular diagnostics and medical testing business Cepheid for about $4 billion.
While GE embarks on a road of significant restructuring under its new CEO, Larry Culp, Danaher will grow one of its core business areas in life sciences through the big buyout. "Crucially, GE said that Danaher agreed to assume pension obligations as part of the deal", Matt Egan reports for CNN Business.
The Washington-based company may also be able to use cash from a pending spinoff of its dental unit, which will be divested through an initial public offering to shareholders. "It lost two-thirds of its market value in the last two years amid a series of operational and investment missteps".