US industrial giant General Electric Co on Friday announced that it is going to shed most of its finance unit and return approximately USD 90 billion to the shareholders as it has gradually transformed into a “simpler” industrial business than an unwieldy hybrid of manufacturing and banking sectors.
Making the announcement on Friday, the company gave a brief outlook of its restructuring plan that included buying back nearly USD 50 billion of its shares, divesting additional GE Capital operations and selling nearly USD 30 billion in real estate assets in the next two years.
Tom Donino, equity trading co-head at First New York Securities, said, “The stock has been under-owned by institutional investors, and that’s going to change now.”
The company’s repurchase program will be partly funded by USD 35 billion via money returned from GE Capital. The program is considered as the second largest in the history after USD 90 billion plan made by tech giant Apple Inc.
GE possessed 10.06 billion outstanding shares as of January 31. The company said that it has expected to lower that by as much as 20 percent to reach between 8 billion and 8.5 billion by 2018.
Overall, GE said that it has planned to shed USD 275 billion in GE Capital assets.
According to the firm, it has planned keeping USD 90 billion in finance assets directly associated with selling its products like medical equipment, jet engines, electrical grid gear and power generation.
The company has USD 1.70 to USD 1.80 per share in forecast earnings for the current year, including 60 cents from GE Capital. In a conference call with the analysts, the company’s executives said that they expect profit to be substantially higher in 2018.
The contracting GE Capital will slash down the earnings by 25 cents per share, the executive said adding that the stock buybacks can offset that impact.
Keith Sherin, the finance unit’s chief, said that the American industrial giant already had a remarkable number of inquiries about the units of GE Capital before the announcement made on Friday.
Over a decade, the shares of General Electric Co fell 23 percent; the S&P edged up 75 percent.