General Electric’s (GE) - Get General Electric Company Report plan to split itself into three didn’t impress everyone Tuesday: S&P Global Ratings put the iconic industrial conglomerate on CreditWatch for a possible downgrade.
"Upon the separation of GE Healthcare [set for early 2023], we would view GE as less diversified," S&P said, according to MarketWatch.
"In the past year, the health care segment has been more resilient and contributed relatively stable profitability and cash flow given the impact of the Covid-19 pandemic on its aviation segment and while power remains in turnaround mode.
The separation of the health care segment would be a credit negative in our view."
To be sure, S&P pointed out that the aviation and energy units have important strengths: strong market positions and large-scale operations.
S&P sees a gradual rebound in aviation from its pandemic-induced stupor and a "more robust margin recovery" in 2022. It anticipates close to pre-pandemic profit margins in 2023.
As for GE’s plan, current Chief Executive Larry Culp will be nonexecutive chairman of the health-care group, which will be run by Peter Arduini when it is spun off.
Tax-free spinoffs of the energy and power divisions will occur in 2024, as they're combined into a single group led by Scott Strazik, GE said.
The bulk of the current company remaining in place -- with the GE name -- will focus on aviation and will be led by John Slattery.
Collectively, the separations will cost around $2.5 billion, GE said, when taxes and operational expenses are ultimately tallied.
GE on Tuesday closed at $111.29, up 2.7%.