A longstanding medical tech maker is now set to make its own moves.
“It’s enabled us to kind of simplify how we run the company,” Peter Arduini, CEO and president of GE HealthCare, said in an interview with Yahoo Finance (video above). “And ultimately, it’s about capital allocation over the long run.”
GE HealthCare stock rose more than 5% in the afternoon session to trade around $59 per share.
Industrial conglomerates spin off businesses
GE HealthCare is just the latest company to spin off in hopes of capitalizing on a growing market in the medical technology arena.
In September, Johnson & Johnson (JNJ) announced it would cleave consumer products like Band-Aid and Tylenol into a separate company called Kenvue. Even companies already laser-focused on the medical tech industry have not been immune: In October, Medtronic (MDT) announced it would spin off its patient monitoring and respiratory interventions businesses.
And if 2021 was defined by the record number of IPOs seen in a calendar year, 2022 was defined by the divestments announced by industry titans.
Cereal maker Kellogg (K) announced it would split into three companies covering snack foods, cereal, and plant-based alternatives. Meanwhile, freight expert XPO Logistics (XPO) completed a spin-out of its brokerage, called RXO, after shedding its contract logistics arm GXO in 2021.
For investors, a more focused and independent company by reducing the need to consider wholly different industries when assessing a company’s potential.
GE HealthCare brings in roughly $18 billion in annual revenue, and the company is valued at around $26 billion. In an indication of GE HealthCare’s post-spin-off size, the company immediately replaced commercial real estate company Vornado in the S&P 500 index.
Arduini said the company intends to invest in research and development, particularly around how to use medical data to uncover possible treatments and medical insights for health care providers dealing with patients.
“We generate a big portion of the data,” Arduini said. “It’s much more than just making the best next device...I would argue if you take a look at the class of med tech companies out there, we’re one of the folks that has the ability to take health care to the next level with turning data into insights, and that’s what we intend to do.”
General Electric will continue to own around 19.9% of GE HealthCare, the company said in a statement. As part of its streamlining plans, the legacy GE company will eventually separate its renewable energy, power, and digital businesses into another spin-off called GE Vernova while the company's remaining assets will include GE’s flagship aircraft engine manufacturing.
Mike Juang is a producer at Yahoo Finance.