The entire game is about cash and debt.

GE Corp gets to reduce the percentage of debt remaining with the other parts of the firm by loading up Healthcare with Pension obligations and corporate debt. This benefits the overall company excluding healthcare.

Next, Corporate gets to have incremental stock equity raised but under the disguise of a new public company which will in turn will be dilutive to current GE shareholders and allow corporate another way to get access to cash without a corporate level bond issuance or additional GE stock being issued.

Overall what Healthcare is going to do is help increase cash for GE at a time when they can’t issue debt, it will reduce the pension obligations and play into the simplicity story that Wall Street wants.

For Healthcare it will not be such a great deal as the biggest issue will become cash flow for the massive pile of debt they will begin having at their new businesses. The amount of debt and other obligations is the exact same reason that Consumer and Industrial was never spun off and instead sold in pieces.

This is a repost of a reply on another thread by @WP5bFsF-1kvt . The original thread covers the topic of the spin-off of GE Healthcare.

Comment! It's anonymous!

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Agree that the deal itself will net some theoretical added value and cash to GE parent.

However, the added value will quickly evaporate after the transaction as Healthcare’s cash flow gets diverted to debt and pension payments and GE Corp level loses out on the Healthcare profitability to the parent. My opinion is that GE’s stock drops after the Healthcare IPO to something around $4 as the market cap continues to resize as productive assets are disposed.

This is just a short term play for cash as GE can not tap the Bond Market for at least not the next two year. This is one of the few remaining plays left.

Mid Term I see this as dilutive to both Healthcare and GE stay behind shareholders and the IPO price is likely to be the top for both until the debt in both equities comes down to a more appropriate level.

5+ Years this likely will be better for Healthcare.

A fcking repost by a fcking ashole

Assuming its a 40% IPO, GE gets the following;

Cash

Reduction of debt

Reduction of pension liabilities

But that's not all. GE shareholders also get 60% of a company that had operating income of $3.36 billion (annualized) over the past nine months. After 20% for taxes this is $2.68 billion. Currently GE is valued by the market at a PE ratio of 10. So 60% of Healthcare is valued at $2.68 billion X 10 X 0.60 = $16 billion. As an independent company, based on a $45 billion market cap(assumption), value to GE shareholders is $27 billion. Added value is $11 billion.

But there is more. GE then pays its debt down. That along with other asset sales will be more than sufficient for the ratings agencies. The threat of a credit downgrade goes away. They also reduce the pension.

Money respects money.

Thread regarding General Electric Co. layoffs

The entire game is about cash and debt.

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