GE Revamp Underway, Sells Health IT To Veritas For $1.05B

General Electric Company (NYSE:GE) advanced a step closer to streamline operations and sharpen its focus on smart diagnostics and connected devices, as it inked an agreement to sell a trio of its health-care information technology businesses to private equity firm Veritas Capital for $1.05 billion in cash.

The transaction includes GE’s Enterprise Financial Management, Ambulatory Care Management and Workforce Management software assets. The deal is expected to close in the third quarter of 2018.

The healthcare division — GE’s third-largest with sales of $19 billion in 2017 — is a solid cash-generator and includes high-growth markets such as life sciences. But some stakeholders and analysts are of the opinion that the segment doesn’t align well with the company’s primary business of making industrial equipment.

This divestiture seems logical, as the conglomerate has struggled to gain a dominant foothold in a crammed market for health-care workforce management and billing software, of late.

It has been nearly five months since GE's CEO, John Flannery, outlined his plan to divest more than $20 billion of assets. The plan included GE's iconic lighting unit and its industrial-solutions operations, which the company agreed to sell to ABB Ltd. (NYSE:ABB) in September 2017. The company is still scouring for options for its locomotives division, which generates about $4 billion in revenues. However, the universe of buyers for this unit seems limited.

Flannery assured investors last year that healthcare will continue to be a focus for GE, along with energy and aviation. However, of late, he has indicated at the possibility of the company’s disintegration into separately traded businesses.

The deal marks one of the first notable portfolio-related moves since Flannery announced the plan to exit at least $20 billion of businesses. The overhaul, coupled with cost cuts and cultural changes, encompass Flannery’s attempts to pull GE out of one of the deepest slumps in its 126-year history. The company’s shares have lost 45.5% in the past six months alone, much wider than the industry’s decline of 11.5%.

GE is not the only industrial giant which is planning to break down its conglomerate structure. Recently, there have been reports that indicate that United Technologies Corporation (NYSE:UTX) is considering such a move too. Also, German player Siemens AG (OTC:SIEGY) offloaded a part of its Healthineers medical imaging business through an IPO worth $5.2 billion.

Moving forward, GE intends to focus on three core segments — power, aviation and healthcare equipment. These segments generate higher margins and are likely to contribute to long-term growth.

General Electric carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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