NY. The historic American conglomerate General Electric (GE), which had Thomas Edison among its founders more than 130 years ago, opens a new chapter in its history this Tuesday, completing its split into three companies that will each focus on a different branch. of activity.
The group announced this move in November 2021 and then noted that it would unfold in several stages.
A first division occurred in January 2023 with the creation of GE HealthCare, which brought together all of the group’s health activities.
But the official culmination of this separation occurs with the disappearance of General Electric as such and the emergence of GE Vernova, specialized in energy, and GE Aerospace, which is the new name of the company that will bring together the most traditional activities of the old conglomerate.
The three firms will be listed on the New York Stock Exchange: one on the Nasdaq technology index and the other two on the NYSE composite index.
There will be no parent company. These are independent companies that will publish their results separately.
“As independently managed companies, the business will be better positioned to deliver long-term growth and generate value for customers, investors and employees,” GE explained in 2021 when it announced the spinoff.
Among the “many reasons” for developing this plan is the desire to simplify the group’s activity, he explained to the Afp Neil Saunders, from the market consultancy GlobalData.
Usually, these moves generate enterprise value and can improve the stock price, the analyst added.
“Managing multiple divisions with many different activities is burdensome for a board,” Saunders said. “It’s also heavier in terms of communicating vision and strategy to investors,” she said.
Others the same way
The 3M conglomerate, which produces adhesive tape and Post-its among other things, also adopted General Electric’s path of separating activities into different firms. In July 2022, it announced the separation of its healthcare branch.
The new company, called Solventum, began trading on the NYSE on Monday.
“This is an important day for 3M and Solventum,” 3M CEO Mike Roman said in a statement.
Like GE, which distributed all the shares of GE Vernova among the shareholders of the old conglomerate, 3M distributed the shares of the new company among its owners.
The main company derived from the spin-off still maintains a portion of the total securities, which it will be able to subsequently monetize on the stock market.
This type of division can determine that the resulting companies end up doing business with old rivals of the original company.
Other traditional Wall Street firms had already chosen this path before, such as Johnson & Johnson, which created Kenvue for its mass consumer products. Or the food giant Kellogg’s (Kellog Company), which in June 2021 announced that it would separate into three divisions although it finally opted for two new firms: WK Kellogg for cereals and Kellanova for snacks from October 2023.
“Kellogg’s is a good example of a company separating its low-growth cereal division from its very rapidly expanding snack business,” said GlobalData’s Saunders. Of course, these decisions also have “disadvantages.”
The possibility of generating savings through scale is lost by sharing some activities that work for all sections, such as accounting or human resources, or even volume costs, such as those associated with employee health insurance.
According to CNBC, some 36 spin-offs will occur worldwide in 2024.
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– 2024-04-08 00:59:07
