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An employee helps install a traction motor onto the truck of a General Electric Evolution Series Tier 4 diesel locomotive at the GE Manufacturing Solutions facility in Fort Worth, Texas.
General Electric is considering a spinoff or public offering of its GE Transportation business, according to a Wall Street Journal report Thursday citing people familiar with the situation.
The embattled industrial conglomerate has been examining different ways to offload the transportation division over the last six months, the report said. Valued at about $7 billion, GE Transportation could become a model for how the company will trim how much it manages without directly selling assets, the Journal reported.
GE CEO John Flannery promised shareholders in October that the company would sell $20 billion in assets as a part of the company’s ongoing restructuring. The conglomerate most recently announced plans for private equity firm Veritas Capital to acquire a GE healthcare unit for $1.05 billion in cash.
Speaking yesterday at CNBC’s Net/Net event, Flannery said he is focused on restructuring GE around three of its core businesses.
“Let’s narrow the scope down to our aviation business, our healthcare business, our power business,” Flannery said.
GE spinoffs may yield greater value to shareholders, who would have the opportunity to regain value through the turnaround of a subsidiary. Those familiar with the GE situation told the Journal that such spinoffs may resemble the Dow Chemical and DuPont deal last year, which saw the two companies combine under the expectation that the conglomerate would eventually be divided into three separate companies.
Spinoffs from U.S. industrial companies return twice the value of the broader stock market, Melius Research wrote in a note last month. The firm has a more optimistic forecast for GE’s value than many others on Wall Street, with most analysts holding price targets of $11 to $16 on GE’s shares.
In premarket trading, GE shares edged up less than 1 percent to just above $13. The stock is down more than 56 percent in the past year.
Read the full Wall Street Journal report here.
