Debt-saddled GE sells off BioPharma business to Danaher for $21.4B

GE sells off BioPharma business to Danaher for $21.4B

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.

"If the deal closes as expected, the big end of the bioprocessing industry will become slightly more consolidated, with Danaher controlling both GE and Pall, competing against Thermo Fisher, Sartorius and MilliporeSigma", Stanton concludes. At the time, GE Chief Financial Officer Jamie Miller said GE had been attracting interest on some of its business units but was "looking to do deals that are smart for the company". Danaher's stock also jumped, rising 5.2 percent from its previous close of $113.48 a share.

"This news meaningfully accelerates our deleveraging plan", said Culp, who took the reins at GE in October.

GE's press release contains the details: Danaher will buy GE BioPharma for $21 billion, cash, plus assumption of "certain pension liabilities" - worth $400 million.

The bio-pharma sale, Culp's biggest so far, puts an exclamation point on his bid to pull GE out of one of the worst slumps in its 127-year history.

Danaher shares were advancing 8.97 percent to $123.66 premarket. The business made about $6.5 billion in revenue last year, more than double the $2.4 billion the unit posted five years prior, according to a recent company presentation. GE Biopharma will operate as a stand-alone company within Danaher's Life Sciences segment.

Culp was formerly CEO of Danaher, where he was instrumental in transforming the company.

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Another analyst, Dan Brennan of the investment bank UBS, said it "looks like a great fit" for Danaher, particularly given how it fits with a previous acquisition of Pall, he wrote in a February 25 note to investors.

And on Monday GE announced the completion of the spinoff of GE Transportation, the century-old railroad division. "It's unlikely we would do something here in the near to medium term", Culp said.

"We're going to focus on improving our core imaging business while we evaluate other options". Meanwhile, GE keeps a large proportion of its health assets including the profitable imaging and diagnostics business, which is an important contributor to cash flow. GE is expected to report its 2019 outlook at an earnings call scheduled on March 14.

The biopharma unit makes equipment for manufacturing biotechnology and drug therapies.

Danaher expects to finance the all-cash transaction with approximately $3 billion of proceeds from an equity offering (which may include an offering of mandatory convertible preferred shares), and the remainder from available cash on hand and proceeds from the issuance of debt and/or new credit facilities.

GE's decision to sell GE BioPharma to its CEO's old company may raise eyebrows among investors.

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