GE sells biopharma business to Danaher for $21.4 billion

GE Stock Is Soaring on the Biggest Asset Sale Yet Under CEO Larry Culp

The shares soared Monday as Culp took his boldest step yet to rescue the troubled behemoth, agreeing to sell GE's bio-pharmaceutical business to his former employer, Danaher Corp., for $21.4 billion.

The business, which makes equipment for researching, developing and manufacturing biopharmaceuticals and had revenues of around $3 billion a year ago, will now operate as a separate division within Danaher's $6.5 billion life sciences division after the closure of the deal. Danaher was said to be paying roughly $20 billion net of tax benefits, or 17x EBITDA and 6x sales, for the unit with earnings accretion 45 to 50 cents expected in 2020.

The transaction is the first big play by new GE CEO Lawrence Culp in a turnaround plan aimed at alleviating the conglomerate's crippling level of debt, and a run of poor quarterly results held back by its troubled power division. Danaher's stock was up 8.52%. GE will receive cash proceeds of about $21 billion and also transfer certain pension liabilities to Danaher.

"Known for decades as a titan of American business, GE has struggled in recent years with a bevy of problems". And given GE's CEO's close familiarity with both companies and presumed warm feelings for his old place of employ, it makes sense that this deal would appeal to both buyer and seller.

Culp slashed GE's quarterly dividend to just a penny a share and has since struck a raft of deals to sell assets.

GE halted plans to spin off its broader healthcare business as it focuses on completing the deal, CEO Larry Culp said yesterday in an interview.

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GE said this month that it would downsize its world headquarters in Boston and return $87 million in incentives it received from MA for moving from CT three years ago. Danaher has already commenced concurrent securities offerings of $1.35 billion of shares of common stock and $1.35 billion of shares of Series A Mandatory Convertible Preferred Stock, but these may be allowed to grow with overallotment options.

The deal is expected to close in the fourth quarter of 2019, contingent on regulatory approvals and customary closing conditions.

That's a sharp turnabout from GE's plight at the end of 2018, as a two-year stock collapse wiped out more than $200 billion in shareholder value. In 2016, for instance, it bought the molecular diagnostics and medical testing business Cepheid for about $4 billion.

"Sale of biopharma a positive", Credit Suisse said in a note.

In the case of Danaher and GE, it looks like Danaher may have won when it comes to deciding who got the better side of the deal.

Culp at the time said, "I'm confident in our team, technology, and the global reach of GE's brand and relationships".

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