Mergers & Acquisitions

GE Chair Mulls Breakup of Company

General Electric's three core assets — power, aviation, and healthcare — may one day be up for grabs.
David KatzJanuary 16, 2018

General Electric chairman and CEO John Flannery told analysts during a special call today that he and other top GE executives need to consider the possibility of breaking up the company.

GE Breakup

On the heels of what he called a “substantial amount of work” analyzing GE’s portfolio of businesses and corporate structure since November, Flannery said “there could be different structures” that could help the company’s business units flourish, improve its “operating rigor,” and maximize shareholder value.

Such a widespread examination of the company’s structure “could result in many, many different permutations, including separately traded assets … in any one of our units, if that’s what made sense,” he said in answer to an analyst’s question.

Flannery gave GE’s previous separations from Synchrony and Baker Hughes as two examples of how such changes might work. Seeking to shrink the size of its financial services operations for years, GE in 2015 split off Synchrony Financial, then considered the largest provider of private label credit cards, in a deal the company described as the equivalent of a $20.4 billion GE share buyback.

In the case of Baker Hughes, in 2017 GE combined the oilfield services company, in which it owned a majority share, with GE’s oil and gas business. GE owns a majority share of the new publicly traded company.

Flannery said that such transactions are “something we’d consider for other parts of the company. Whether that’s Power, Aviation or Healthcare, we’re going to have to go through all of those exercises.”

Since he became CEO last December, Flannery has said he plans to refocus the company on those three “core assets” — power, aviation, and health care. Thus, a GE breakup may well be on the table at some unspecified time in the future.   

The purpose of the call was to announce a $6.2 billion, fourth-quarter 2017 charge stemming from huge prior-year losses sustained by its North American Life & Health reinsurance portfolio. GE reported that GE Capital, its ailing financial services unit, expects to contribute $15 billion to its reserves over seven years.