GE to get rid of consumer lighting business as cash crunch escalates

Engineering giant General Electric (GE) has been on a divestiture spree, in an effort to revitalize its balance sheet. On the heels of charting out a plan to salvage the ailing power division, the company this week announced its decision to sell the consumer lighting division titled Current, the latest unit to part ways with the group.

If the ongoing negotiations come to fruition, the consumer lighting business of the Boston-based industrial juggernaut will become a part of New York-based private equity firm American Industrial Partners in the coming weeks. While it is speculated that the transaction would complete early next year, the financial terms have not been disclosed.

After taking charge as the new CEO last month, succeeding John Flannery who left more than a year after joining the company, Larry Culp set a new direction for the comprehensive restructuring plan envisaged by his predecessor. It needs to be seen whether Culp would tweak the core agenda of reducing the conglomerate to its aviation, power and healthcare businesses.

While  the transaction is expected to be completed early next year, the financial terms have not been disclosed

Exposing the dismal state of affairs, the management recently reduced the dividend to a meager 1 cent from 12 cents in an effort to rein in the company’s faltering cash flow. Announcing its first quarterly report under Culp, GE recently reported earnings of $0.14 per share on revenues of $29.57 billion for the third quarter, both below the estimates.

GE has raised about $10 billion through asset sales since it launched the turnaround program a year ago, including the century-old rail business and automotive lighting business. Things took a turn for the worse last week when federal prosecutors launched an investigation into a multi-billion dollar write-down of the company’s power division.

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The ‘Current’ segment provides consulting services to companies and government agencies on optimizing electricity usage by managing their lighting systems digitally. It is widely speculated that the company would get rid of the rest of its consumer-lighting business in the future.

After falling about 54% over the last year, GE shares are currently trading at a near-ten-year low. The stock, which dropped about 50% since January, traded higher throughout Tuesday’s regular session.

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