Summary
- General Electric built its empire on the back of financial engineering, which, of course, included the use of large amounts of debt.
- General Electric is now faced with the task of reducing its debt burden and doing so before it can really concentrate on growing what it considers to be its core.
- The current sale of its biotechnology business to Danaher is a big step in the right direction, providing the company with some breathing room to focus on company's core businesses.
Larry Culp, CEO of General Electric, pulled off a winner this week.
General Electric Co. (NYSE: GE) announced Monday that it was selling off its biotechnology business for $21 billion in cash.
The proceeds will go to pay off part of GE’s big debt load.
Lots and lots of debt is good? Right? Until it isn’t!
Mr. Culp is quoted as saying on Monday that this deal “gives GE funds to fix its balance sheet and will allow the company to ‘play a little more offense so folks don’t look at us like a desperate seller. We are on better footing.”
To pay down GE’s debt, the company had pledged to raise around $30 billion in cash from asset sales. With the current deal, Mr. Culp has gained $21 billion to reduce this amount by about two-thirds. This will take a lot of pressure off.
The only real question heard about the deal concerned whether or not Mr. Culp jumped to quickly at the opportunity to get funds into the company sooner rather than later.
