GE to break up into three companies focusing on aviation, health care, and energy

November 10, 2021: On Tuesday, the company announced that U.S. industrial giant General Electric ( GE ) would split into three companies in the coming years of seeing its stock underperform.

The company will be divided into separate units focused on aviation, health care, and energy. GE plans to spin off the healthcare unit by early 2023 and the energy unit by 2024, the company said in a press release.

GE shares, which are up 55% over the previous 12 months, increased 12% in premarket trading.

“To create three industry-leading, global public companies, each can benefit from focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees. We put our technology expertise, leadership, and global reach to work to serve our customers better,” CEO Lawrence Culp said in a press release.

The name GE is living on with the aviation company after the move is complete, and Culp will keep on leading that unit, the company said.

General Electric was co-founded in the late 1800′s by Thomas Edison and went through several transformations over the previous century as the U.S. economy changed, which became a leader in appliances, jet engines, and power turbines.

The conglomerate expanded in the 1980s under the late Jack Welch, getting into financial services and back into broadcasting with the purchase of NBC, sporting enviable earnings growth and returns for investors along the way.

GE spent periods as the company by market value as recently as the early-2000s, but then the financial crisis hit. Weighed down by its troubled financial arm, GE could never climb back on top under Welch’s successor Jeff Immelt. The stock is dumping from the Dow Jones industrial average in 2018 after being one of the original members of the blue-chip standard since 1896.

Despite the recent outperformance, GE shares have badly underperformed the market over the last two decades. According to FactSet, the stock has lost 2% annually since 2009, compared to a 9% annual return for the S&P 500

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High debt levels have plagued the company in recent years that have drawn skepticism on Wall Street. The capital structures of the new firms will be announced at a later date, GE said. The company said it would use proceeds from the recent sale of its aviation financing unit to pay down debt.