Financial markets have melted up, spurred by tax cuts, thawing trade tensions and easy money from the Federal Reserve. General Electric (GE) has been a beneficiary of the market’s rise. It has spurred GE’s own share price and made it more conducive to hive off assets in order to pare debt. In Q3, Ge received approximately $4.6 billion of cash (net of taxes) related to its Wabtec (WAB) exit and sale of part of its stake in Baker Hughes (BKR). GE bulls are waiting with bated breath for its $21 billion sale of GE Biopharma to Danaher (DHR).

Chatter suggests the transaction values Biopharma at around 17x EBITDA. I estimate the sale could cut GE’s debt load from $93 billion to about $63 billion, yet GE’s debt would still be considered junk status. The scary question is, “What happens if the sale doesn’t go through?” Such an event could be devastating for GE. Danaher is clearing the decks for a potential deal closing in Q1 2020.

Danaher management seems excited about the prospects of adding GE Biopharma to its portfolio of businesses. At a valuation of 21x EBITDA the deal would imply a certain amount of earnings growth from the target company. Financial results imply that GE Healthcare’s Life Sciences division (which houses Biopharma) could be facing headwinds. Read more:



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