The renowned American industrial conglomerate, General Electric, said Tuesday that it will split into three public entities in order to streamline its business, reduce debt, and revive a poor-performing stock price.
On Tuesday, GE shares closed 2.6% higher at $111.29, after reaching a nearly three-and-a-half-year high, versus a 0.35% dip in the broader S&P 500 index.
Since July 30, when the business lowered the number of traded shares, the company's stock has gained almost 9%.
GE will be split into three divisions: aviation, health care, and energy. The health-care unit will be spun out in early 2023, and the energy unit will be spun off in early 2024, according to the company.
The 129-year-old conglomerate that was once the most valuable U.S. corporation and a global symbol of American commercial strength has come to an end with the breakup.
In a statement, Chief Executive Officer Lawrence Culp stated, the company is "putting our technical knowledge, leadership, and global reach to work to better serve our customers."
Thomas Edison co-founded General Electric in the late 1800s, and the company has gone through multiple changes over the last century as the American economy has transformed, becoming a leader in appliances, propulsion systems, and electricity turbines.
Under the late Jack Welch, the industrial giant expanded swiftly in the 1980s, moving into financial services and then back into broadcasting with the purchase of NBC, achieving outstanding earnings growth and returns for investors along the way.
The spin-off is Culp's most ambitious endeavor to reorganize the company's operations since taking over as chief executive of the company in 2018.
Culp has spent the last three years focusing on debt reduction through asset sales and cash flow improvement through streamlining operations and minimizing overhead expenditures.
But GE has been burdened by large amounts of debt in recent years, which has prompted Wall Street to be skeptical.
Meanwhile, the capital structures of the new entities will be published later, the company said, and Culp disclosed on a conference call with investors that the energy unit will have the least amount of debt.
The profits from the recent sale of its aviation financing subsidiary would be used to pay down debt, with gross debt forecast to be less than $65 billion by the end of 2021, GE said.
