General Electric has launched ambitious plans to make its healthcare arm one of the largest of its kind in the world with an initial public offering (IPO) set to go live next spring. The full details of the confidential IPO have yet to go public, but GE is bidding for a greater share of the market.
By making its healthcare unit a standalone entity, GE will create a massive health giant and will likely raise the significant capital that could allow it to diversify and grow other strands of its business.
The company has had its ups and downs in recent years and recently traded blows with US President Donald Trump over his implementation of tariffs, which hugely impacted on GE’s share price throughout 2018. The decision to float its healthcare arm is likely to help generate the necessary capital to change its supply chains and restructure any ailing parts of its business so that it can be more resilient to protectionist government measures.
According to Bloomberg, this is one of the biggest IPOs for a healthcare business on record and should fetch a market value of up to $70bn. One of the reasons that the news may have leaked so early is to help build up hype and interest so that GE can find a number of suitable investment funds to drive its business and capital.
Bloomberg also reported that GE has enlisted the help of most of the major wealth management advisors, including JPMorgan, Goldman Sachs, Bank of America, Citigroup and Morgan Stanley. This shows that it is hoping to cover a lot of ground by taking a wider approach to its listing.
The market value total cited by the media likely comprises GE’s market cap and its outstanding debt. Cash reserves should not figure into the final number.
It seems to be the right time for companies such as GE to make this move, especially when observing how German company Siemens performed since listing its Healthineers arm. It saw its shares rocket up 32% in the aftermath, helping it find a surer footing in a world market that still seems quite unstable. Many emerging markets began to dip earlier in the year following trade disputes between the US and China, but these seem to have simmered down somewhat.
Overall, it appears that the stronger bull market has dipped lower at the end of this year, and some of the largest companies are using what they believe could be near the peak of their current share prices to begin listing their offerings publicly.
This kind of move takes advantage of strong market sentiment to grow businesses, and GE now looks set to embark on a similar path as Siemens.
Other market moves have occurred this week in the pharma sector, as Pfizer and GlaxoSmithKline confirmed that they will be combining their consumer-health arms in a merger worth £10bn ($12.7bn). The deal should help both companies increase their resilience to market disruption.