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General Electric (NYSE:GE) in response
“We are focused on executing against the plan we’ve laid out to improve GE’s performance. Today’s announcement does nothing to change those commitments or our focus in creating a stronger, simpler GE.”
GE to sell healthcare unit and Baker Hughes stake
Plans to spin off the healthcare business and divest its stake in oil-field services provider Baker Hughes, amidst growing concerns over the cash-strapped company’s ability to sustain its current dividend program.
The move takes the industrial juggernaut closer to its goal of raising $20 billion by selling various industrial assets as part of an extensive restructuring program planned over three years.
In the current fiscal year $GE to exit assets worth $10 billion under the program. The healthcare unit will be divested over a period of 12-18 months. It is looking to slash debt by $25 billion and achieve corporate cost savings of more than $500 million by the end of 2020.
The massive restructuring program, which primarily involves divestiture of loss-making units, is aimed at focusing more on the core businesses of power, jet engine, and renewable energy. While the power business is in the negative territory, the renewable energy unit is currently generating meager profits.
Earlier this week, GE announced the divestiture of its distributed power unit to buyout group Advent for $3.25 billion. Last month, the company sold its transportation unit, which manufacturers train locomotives, to Wabtech for $11 billion. While being able to exit some of the non-core businesses successfully, GE is facing difficulties in finding a buyer for the lighting division, a business it pioneered during the initial years of establishment.
General Electric Co. (NYSE: GE) downgraded to Underweight from Neutral at JPMorgan and t lowered its price target to $5 from $6 (Prior $10.01 close).
GE shares were indicated down over 5% at $9.45 on the downgrade.
Market Summary > General Electric Company
NYSE: GE
9.20 USD −0.31 (-3.21%)
Apr 9, 12:59 PM EDT ·GE Wrecked Today after report by Harry Markopolos says finance unit hiding $38 billion fraud
He was Madoff whistleblower
Says Bigger Than Enron
Released a 175-page report[color=orange]Market Summary > General Electric Company
NYSE: GE 7.75 USD −1.28 (14.17%)[/color]GE CEO Larry Culp bought nearly $2 million worth of the company’s stock after fraud accusation
General Electric CEO Larry Culp bought a bulk of the company’s stock after Madoff whistleblower Harry Markopolos called the conglomerate “a bigger fraud than Enron.”
A Thursday evening filing with the SEC revealed that Culp bought 252,200 shares for about $7.93 each. Culp, who took over the struggling industrial conglomerate last year, has roughly doubled his holding of GE shares this week, according to the filing.
Shares of GE were up about 2.5% in after-hours trading.
Culp is former CEO of Danaher, said the accusations were false and driven by market manipulation.
“GE will always take any allegation of financial misconduct seriously. But this is market manipulation – pure and simple,” he said in a statement. “Mr. Markopolos’s report contains false statements of fact and these claims could have been corrected if he had checked them with GE before publishing the report.”
A U.S. hedge fund, that Markopolos wouldn’t name, paid Markopolos to conduct and publish his report, and Markopolos told CNBC that he was getting a “decent percentage” of profits that the hedge fund would make from betting against GE.
Leslie Seidman, a GE board director and chair of its audit committee, also pushed back on the Markopolos report, which she said contained “numerous novel interpretations and downright mistakes about the actual accounting requirements.”
“In his own words, he stands to personally financially benefit from today’s significant market reaction to his report, and he is selectively front-running widely reported regulatory processes and rigorous investigations without the benefit of any access to GE’s books and records,” Seidman said.
The report went through a list of accounting irregularities that Markopolos says amount to a $38 billion fraud, equivalent to more than 40% of GE’s market capitalization. Much of the report focuses on GE’s business of reinsuring long-term care insurance providers.
https://www.cnbc.com/2019/08/15/ge-ceo-larry-culp-bought-companys-stock-after-fraud-accusation.html
General Electric Company $GE After Crushed by 11.30% today is up After hours 8.17 +0.16 (+2.00%) after SEC disclosed CEO bought $2 Million worth of shares today comment
Opinion: Why the prospective $70 billion buyout of Walgreens may signal the stock-market rally is about to end
Published: Nov 6, 2019 11:58 a.m. ET
The deal would be the biggest LBO ever — and carry echoes of a troubled deal of the past
By LinaSaigolIf investors ever needed a clear signal that this is the top of the market, they now have one.
Walgreens Boots Alliance shares surged Wednesday amid speculation that the U.S.-listed drugstore group has been considering a $70 billion take-private deal.
If private equity can pull it off, it would be the biggest leveraged buyout ever, dwarfing the $45 billion transaction in which energy group TXU was taken private in 2007, just a year before the financial crisis rocked global markets and prompted unprecedented intervention by global central banks.
Financing a buyout deal on the scale of a Walgreens deal today could be a big challenge.
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For one Walgreens already has $15 billion in debt on its balance sheet. A potential bidder would need to add more leverage to fund the purchase. That would leave the drugstore chain particularly vulnerable when the credit cycle turns — which is looking increasingly likely.
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Factor in a premium on the current stock-market valuation and the total cash needed becomes quite dizzying. All this at a time when risky corporate loans are rapidly piling up on Wall Street’s books.The volume of leveraged loans has reached $3.4 trillion worldwide, according to estimates from the Bank of England. Credit quality has deteriorated, with most new leveraged loans being issued by companies that have high levels of debt as compared with their earnings.
Worse, the share of new leveraged loans with no maintenance covenants — requiring the borrower to maintain certain financial buffers such as a debt-to-Ebitda ratio, or earnings before interest, tax, depreciation and amortization, of less than five times — has tripled since 2007, the U.K. central bank said.
Banks are already struggling as investors steer clear of hefty private-equity debt packages.
Take Bain Capital’s $4 billion buyout of market-research firm Kantar in July. The U.S. private-equity firm lined up 11 banks to assemble a $3 billion debt package.
But after an underwhelming reaction from the market, the banks had to restructure the debt package to make it more palatable to investors. This included raising the pricing on the loans and tightening the covenants.
Secondly, Walgreens finances aren’t looking so good. The company’s profit in the fourth quarter plunged 55% to $677 million, compared with the same quarter in 2018. And margins are under increasing pressure as the price Walgreens pays for generic drugs continues to fall, but not as fast as the amount customers pay.
Walgreens is even more exposed than its competitors to pricing demands because it doesn’t own pharmacy-benefit managers who play an outsize role in drug pricing.
On top of all that, the timing for such a behemoth transaction couldn’t be worse, with political resistance almost a certainty. Private-equity groups are under intense scrutiny from Democratic presidential candidates, with Sen. Elizabeth Warren calling for greater federal regulation of the industry.
She has compared buyout firms to vampires, saying they are “bleeding the company dry and walking away enriched even as the company succumbs.”
The debt-fueled buyout of TXU also took place in an overheated private-equity market.
When KKR and TPG bought the Texas utility, they were betting that natural-gas prices would rise. But the two buyout firms failed to anticipate the economic crisis that would reduce power demand and the technological revolution around shale that depressed the prices paid for electricity.
As the price of natural gas fall sharply, the buyout groups struggled to service the huge debt load taken on to finance the acquisition, and the utility eventually filed for bankruptcy.
Timing matters.
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