(Bloomberg) -- General Electric (NYSE:GE) Co.’s shares soared in pre-market trading Monday, after the battered conglomerate struck a “favorable” deal with Danaher Corp (NYSE:DHR). to sell its biopharma business for $21 billion in cash and assumption of certain pension liabilities.
Wall Street analysts covering GE said the deal should help alleviate much of the liquidity concerns around the company. Shares of the company jumped more than 18 percent before the market opened to cross $12 per share, a level last touched in October. Danaher added 6.7 percent.
- “This is a favorable transaction as it quickly solves the deleveraging challenges for the company, gives them more flexibility in regards to other transactions that they might consider, and pending clarity on tax leakage, you get around $60 billion value for the healthcare business,” Gabelli & Co analyst Justin Bergner (buy) said in a phone interview
- “The top priority continues to be, from an operational standpoint, turning around the power business,” Bergner added
- Noted that while the biopharma business was the “crown jewel” of GE healthcare unit, it did not “necessarily had synergistic linkages” to the rest of the GE healthcare business
- “Biopharma price was about two times what we would have estimated its value to be,” William Blair analyst Nicholas Heymann (outperform) said, adding that “GE should still be able to raise over $20 billion for sale of just under 50% of GE Healthcare
- “With the announcement of the biopharma sale to Danaher, Culp has turned the page on the next chapter of GE’s transformation to how he plans to revitalize GE Power,” Heymann added
- In a note to clients, Evercore ISI’s Ross Muken said the deal was likely to be a “multi-year home run” for Danaher, which he rates outperform
- “In terms of price paid the headline of 17x appears very favorable on the surface given the unique nature of the business,” Muken added
- NOTE: Feb. 22, GE Could Get $22 Billion From Asset Sales, Cash Flow: Moody’s