The planned spinoff of General Electric’s health unit—GE Healthcare—could be in jeopardy after news that John Flannery was removed as chairman and CEO of the industrial conglomerate, according to one industry analyst.
Jim Corridore, a research equity analyst at CFRA, said that GE’s incoming leader, former Danaher CEO Lawrence Culp, could decide that the multibillion-dollar health division would be better off staying within the company.
GE Healthcare, a dominant player in hospital and lab equipment, is a bit of a cash cow, generating roughly $19 billion in revenue and throwing off $3.4 billion in profit last year. It accounted for 15.8% of the conglomerate’s total sales, and 43.2% of its operating profit in 2017.
“Maybe healthcare is not going to get spun off now,” Corridore said in an interview with CNBC’s “Power Lunch.” “Maybe some of the parts that were going to be sold make more sense today.”
GE Healthcare spokeswoman Jennifer Fox said the unit “plans to continue working toward separation of GE” and news of Flannery’s removal “does not change what’s happening at GE Healthcare.”
And according to GE, the company remains “committed to establishing healthcare as a separate independent entity.”
GE shares were soaring more than 7% early in the afternoon on Oct. 1 after news that the board removed Flannery from his position.
Flannery tasked GE Healthcare CEO Kieran Murphy with spinning out the unit into a separate, independent company by the end of 2019. The move made sense for GE, allowing it to double down on its core industrial and energy businesses.