Analysts say the GE Healthcare spin-off will attract investors
Industry analysts said that GE’s divestiture of its healthcare division may give the new company greater flexibility and promote the development of its artificial intelligence-based diagnostic tools.
Enterprise Group Announce The company plans to split its healthcare, aviation and energy businesses into independent public companies on Tuesday. The newly established healthcare company is planned to be established in 2023. GE Revealed a plan In 2018, it divested the GE Healthcare subsidiary, but withdrew the following year. The parent company intends to retain 19.9% ??of the profitable diagnostic-oriented business as it aims to raise funds and repay debt.
GE Healthcare has been investing in new artificial intelligence And imaging technology. Last year, GE introduced new software that uses artificial intelligence to improve the clarity of MR images, and the company acquired Prismatic Sensors, a photon counting CT technology.
Healthcare consultants and analysts said that the spin-off GE Healthcare as an independent company can operate more flexibly and attract investors.
“This is a popular department within GE. Maybe they can make decisions faster without a corporate structure,” said Jeff Goldsmith, president and founder of the consulting firm Health Futures. “A lot of money is pouring into the field of artificial intelligence. This technology can greatly improve the efficiency of diagnosis. There are reasons to be optimistic.”
Goldsmith said that GE Healthcare has sold a large amount of imaging and diagnostic hardware to healthcare companies, but the spin-off may take time to improve its software development.
Michael Abrams, managing partner of Numerof & Associates, a healthcare consulting firm, said that leaving a diversified corporate group is a double-edged sword. He said that the new entity will have greater flexibility, but will not be supported by the strength of large companies.
Abrams said: “With all the resources of General Electric, GE Healthcare can do things that other companies of the same size cannot do.” “On the other hand, although they may not have the same abundant resources, they do not. Know whether they are used in the most profitable way. I believe that GE’s structure is a challenge in making decisions.”
GE Healthcare aims to use its medical equipment contracts with suppliers to form Consulting and data analysis partnershipThe subsidiary has been expanding its network of command centers that collect real-time data to help the health system streamline patient processes, reduce waiting times, balance workloads, and improve clinical standardization.
“GE has the potential to upgrade the equipment software already installed in many medical institutions. This is a huge advantage,” Abrams said.
Lawrence Culp, Jr., Chairman and CEO of GE, stated in a press release that GE has the responsibility to “advance quickly to achieve precision health.” Culp will serve as the non-executive chairman of the new company, and Peter Arduini will take over as President and CEO of GE Healthcare before the spin-off next year.
By publicly listing all three independent companies, GE will need to attract investors for each new entity. Mark Armstrong, a shareholder of consulting firm LBMC, said this will not be a problem.
“Splitting these different products into separate companies allows them to attract investors who are fully interested in healthcare technology,” Armstrong said. “Some investors want to avoid physical stores, and part of the reason for breaking their process, technology, and hard asset departments is to attract more investors.”
GE Healthcare accounted for about 23% of the parent company’s $79.6 billion in revenue last year. Last year, health care was GE’s most profitable sector, although it usually generates less profit than aviation. After the announcement on Tuesday, General Electric shares rose by 2.65%.
Morningstar stock analyst Joshua Aguilar wrote in a report to analysts: “Investors will now have the opportunity to own one or two special franchises in aviation and healthcare. , Without having to continue to hold GE’s more challenging business.” “GE’s plan is a previous broad portfolio structure first considered by CEO Larry Culp’s predecessor John Flannery in June 2018 A much-needed voice.”
Nathan Ray, a partner at consulting firm West Monroe, said that as a well-capitalized independent business, GE Healthcare will be able to accelerate decision-making, focus on key growth areas and revitalize its M&A activities.
“The most important thing is that the independent GE Healthcare will be able to focus on innovative investments and allocate capital to large and promising growth opportunities, both organic and inorganic,” Lei said.