In a deal that stunned the financial markets, General Electric (GE) agreed to sell its biopharma business to Danaher Corporation (DHR) for $21.4 billion:

Shares of General Electric Co. rocketed Monday after a deal to sell its biopharma business for $21.4 billion in cash to Danaher Corp, but remained on track to extend their longest streak below the widely watched 200-day moving average in at least 40 years.

GE said the biopharma business, which was part of GE Life Sciences and under the GE Healthcare umbrella, generated about $3 billion in revenue in 2018.

GE CEO Larry Culp was formerly the CEO of Danaher from 2001 to 2014. Culp was credited for having led a turnaround at Danaher. Whether he can turn around GE in the same fashion remains to be seen. The news sent GE higher by more than 8% in afternoon trading Monday. I believe the deal is a masterstroke for the following reasons.

It Makes A Sizable Dent In GE’s Debt Load

As part of the turnaround efforts Culp pledged to cut GE’s sizable debt load whether through asset sales or via cash flow. The company has hived off GE Transportation and sold down a sizable stake in Baker Hughes (BHGE). However, I was stunned by the biopharma deal, if nothing else due to its sheer size. At Q4 2018, GE’s total debt load was $110 billion, down from about $115 billion at Q3. Read more:

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