GE announced the results of its strategic review and said it will focus on Aviation, Power and Renewable Energy. In addition to the pending combination of its Transportation business with Wabtec, GE plans to separate GE Healthcare into a standalone company, pursue an orderly separation from BHGE over the next two to three years, make its corporate structure leaner and substantially reduce debt. GE’s board of directors unanimously approved the plans

Outlined below are brief summaries of the strategic review:

• Company to focus on Aviation, Power and Renewable Energy
• Healthcare to become standalone company; GE expects to monetize 20% and distribute remaining 80% of GE Healthcare to shareholders tax-free
• Plans to fully separate Baker Hughes, a GE company (BHGE)
• Strengthening the balance sheet: Clear path to reduce debt by $25 billion, achieve Industrial net debt to EBITDA of less than 2.5x by 2020 and further de-risking GE Capital
• Businesses as center of gravity: Leaner corporate structure with $500+ million in savings
• Plans to maintain current quarterly dividend through completion of Healthcare separation
• Larry Culp to succeed Jack Brennan as lead director

John Flannery, chairman and CEO of GE, said, “Today marks an important milestone in GE’s history. We are aggressively driving forward as an aviation, power and renewable energy company—three highly complementary businesses poised for future growth. We will continue to improve our operations and balance sheet as we make GE simpler and stronger.”

Flannery continued, “GE Healthcare and BHGE are excellent examples of GE at its best—anticipating customer needs, breaking barriers through innovation and delivering life-changing products and services. Today’s actions unlock both a pure-play healthcare company and a tier-one oil and gas servicing and equipment player. We are confident that positioning GE Healthcare and BHGE outside of GE’s current structure is best not only for GE and its owners, but also for these businesses, which will strengthen their market-leading positions and enhance their ability to invest for the future, while carrying the spirit of GE forward.”

GE is making fundamental changes to how it will run the company. The new GE Operating System will result in a smaller corporate headquarters focused primarily on strategy, capital allocation, talent and governance. It will result in better execution, increased speed and is expected to generate at least $500 million in corporate savings by the end of 2020. Under the new GE Operating System, most resources and services traditionally held at the headquarters level will be realigned to the businesses.

GE is targeting an Industrial net debt-to-EBITDA ratio of less than 2.5 times and a long-term A credit rating. GE also plans to reduce Industrial net debt by approximately $25 billion by 2020 and maintain more than $15 billion of cash on the balance sheet.

GE expects to maintain its current quarterly dividend, subject to board approval, until GE Healthcare is established as an independent entity. At that time, the new GE Healthcare Board of Directors will determine GE Healthcare’s dividend policy, which GE expects to reflect healthcare industry practices. Also at that time, the GE Board expects to adjust the GE dividend with a target dividend policy in line with industrial peers.

Kieran Murphy, president and CEO of GE Healthcare, will continue to lead GE Healthcare as a standalone company, maintaining the GE brand.

“GE Healthcare’s vision is to drive more individualized, precise and effective patient outcomes,” Murphy said. “As an independent global healthcare business, we will have greater flexibility to pursue future growth opportunities, react quickly to changes in the industry and invest in innovation. We will build on strong customer demand for integrated precision health solutions and great technology with digital and analytics capabilities as we enter our next chapter.”

Flannery added, “GE Healthcare is an industry leader with financial strength, global scale and cutting-edge technology. Our talented Healthcare team will continue delivering precision health solutions, building on our heritage of technology innovation that delivers patient outcomes.”

GE Healthcare recorded more than $19 billion in revenues in 2017 and posted 5% revenue growth and 9% segment profit growth in the same year. The business provides medical imaging (including contrast agents), monitoring, biomanufacturing and cell therapy technology, leveraging deep digital, artificial intelligence and data analytics capabilities.

GE expects to generate cash from the disposition of approximately 20% of its interest in the Healthcare business and to distribute the remaining 80% to GE shareholders through a tax-free distribution. The structure, sequence and timing of these transactions will be determined and announced at a later date but are expected to be completed over the next 12 to 18 months. GE Healthcare will conduct business as usual throughout this process, continuing to serve its partners and customers.

GE plans to fully separate its 62.5% interest in BHGE in an orderly manner over the next two to three years. BHGE’s full stream offering brings together equipment, services and digital solutions to help its customers be more productive—a unique and powerful value proposition in a changing market.

GE continues to work to make GE Capital smaller and more focused on supporting its core industrial businesses. The company intends to materially shrink the balance sheet of GE Capital targeting sales of $25 billion in energy and industrial finance assets by 2020. The company is assuming an approximately $3 billion capital contribution to GE Capital in 2019. In addition, the company is actively exploring options to reduce its insurance exposure.

Lastly, elected Larry Culp, former CEO of Danaher, to succeed Jack Brennan as lead director on the GE board. Culp will also chair the board’s management development and compensation committee.