(AP Photo/Charles Krupa)
ASSOCIATED PRESS
Deal Overview
On November 9, 2021, General Electric (NYSE: GE
GE
, $93.13, Market Capitalization: $102.3 billion) announced its plan to form three investment-grade, industry-leading, global public companies focused on the growth sectors of aviation, healthcare, and energy. GE intends to execute a tax-free spin-off of the Healthcare business in early 2023, creating a pure-play company at the center of precision health and expects to retain a 19.9% stake in SpinCo. This will be followed by combining GE Renewable Energy
REGI
, GE Power, and GE Digital into one business and then pursuing a tax-free spin-off in early 2024. Following these transactions, GE would operate as a leading aviation-focused company. The separation will result in three global, industry leading companies with distinct business characteristics, capital structure, and investment profiles. The proposed spin-offs of Healthcare (SpinCo 1) and the Renewable Energy and Power (SpinCo 2) business are intended to be tax free for GE and GE shareholders for US federal income tax purposes. The company expects to incur one-time separation, transition, and operational costs of ~$2 billion and tax costs of less than $0.5 billion, depending on the specifics of the transaction. Moreover, incremental annual costs of $150 -$200 million are expected for each of the two spin offs initially, which is likely to reduce over time. The company and its businesses will continue to serve GE’s partners and customers throughout this transition.
General Electric and Price Performance
Spin-Off Research
Each spin-off is 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 US Securities and Exchange Commission, and satisfactory completion of financing. Transactions are not subject to bondholder consent. GE intends to execute the spin-offs of healthcare in early 2023 and the Renewable Energy and Power business in early 2024. GE Chairman and CEO H. Lawrence Culp, Jr. 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 (Renewable Energy and Power business), and then will lead the GE aviation-focused company (RemainCo) 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 will continue as CEO of Aviation business. The respective capital structures, brands, and leadership teams for each independent company will be determined and announced later. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as lead legal counsel. Evercore
EVR
and PJT Partners
PJT
are the lead financial advisors to GE on the transaction. Additionally, GE has …….