GE debt rallies, bond insurance price drops on Danaher deal

Kenny Tucker
February 28, 2019

This morning, General Electric announced that it has reached a "definitive agreement" to sell its BioPharma business to Danaher - GE's CEO's old shop - and GE will receive $21.4 billion in return.

The business, which makes equipment for researching, developing and manufacturing biopharmaceuticals and had revenues of around $3 billion past year, will now operate as a separate division within Danaher's $6.5 billion life sciences division after the closure of the deal. The net purchase price of about $20 billion, after anticipated tax benefits, represents a multiple of some 17 times expected EBITDA this year, Danaher said.

DHR stock was up 7% and GE stock was up 8% as of noon Monday.

"Today's transaction is a pivotal milestone", Culp said in a statement published by CNN Business.

The company's shares rose 10 percent in response.

General Electric is selling its biopharma business for $21.4 billion, with shares in the company jumping 16 percent upon the news... Culp is trying to pull GE out of a two-year tailspin that saw stock losses wipe out more than $200 billion shareholder value.

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Culp was formerly CEO of Danaher, where he was instrumental in transforming the company. Stock prices for both GE and Danaher Corp increased after the news of the deal broke out to the public. For GE, an American industrial stalwart that has faced troubles in recent years, the sell-off brings in much-needed cash to reduce leverage and strengthen its balance sheet.

"We expect GE Biopharma to advance our growth and innovation strategy", said Danaher Chief Executive Thomas Joyce, adding that the assets will bolster "end-to-end bioprocessing solutions that help enable breakthrough development and production capabilities".

While GE may still unload the remaining health operations at some point, the company will now turn its attention to completing the bio-pharma sale, Culp said.

Danaher is expected to pay the bulk of the sum, $21bn, in cash, with the deal expected to close in the fourth quarter of 2019.

The bulk of the deal's financing will come from Danaher's available cash and proceeds from the issuance of debt or new credit facilities. "To do this, we are improving execution, customer focus, and how we set priorities across GE". Last year, it bought Integrated DNA Technologies, a gene-sequencing and editing company, for $2 billion. Where things get interesting is that Danaher was worth about $80 billion prior to the merger announcement. "So folks don't look at us like a desperate seller", he said. Culp, the first outsider to lead the company in its history, has made restructuring a priority in turning the company around.

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