Larry Culp has described his management style as chief executive of General Electric as “common sense, vigorously applied.” His plan to break the company into three listed parts, unveiled on Tuesday, looks like common sense, belatedly applied.
Already, that $210 billion beats GE’s current enterprise value of around $160 billion, ignoring its barely profitable power and renewables unit. Apply the uplift to the company's roughly $120 billion equity value as of Monday, and shareholders could see gains of more than 40% over a few years after decades of stock-market underperformance. A breakup could even open up future deals.
Other obstacles include GE itself. The company has a habit of missing targets, from the slow-motion sale of its lightbulb business to its goal of getting net debt down to 2.5 times EBITDA, which GE now says it will achieve in 2023 – five years after former boss John Flannery promised it by 2020. Flannery also pledged to spin off the healthcare division but didn’t. Investors should be happy when GE CEOs do what they say. History shows it's less impressive when they say what they’ll do.