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How GE’s Larry Culp split the empire Jack Welch built

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November 10, 2021

By Anirban Sen and Rajesh Kumar Singh

(Reuters) – It was the break-up that eluded a generation of General Electric Co insiders.

When Larry Culp, the first GE chief executive not to rise from within its ranks, convened a board meeting earlier this month to greenlight the split of the industrial conglomerate into three companies, he secured its backing.

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It was a far cry from board meetings held in the 1980s and 1990s by one of Culp’s predecessors, Jack Welch. The iconic entrepreneur got the GE board to back his moves in the opposite direction, getting GE into businesses as diverse as mortgages, credit cards and television entertainment and prompting the Federal Reserve to characterize the company as too big to fail.

Welch’s successors, Jeff Immelt and John Flannery, gradually sold of many of GE’s businesses to boost the company’s ailing share price in the two decades that followed.

But it was Culp who managed to push through the ultimate untangling of GE, with a plan to break it up into three companies to house its healthcare, aviation and power businesses separately.

Culp, 58, became GE’s CEO in October 2018 after joining it as a board director six months earlier. He started discussing the idea of a break-up with GE’s board a year ago, according to a person familiar with the matter, but discussions intensified in the last six months as the plan he put together took shape.

“With the progress on the deleveraging, the progress with our operational transformation, the pandemic lifting … there’s no reason to wait a day,” Culp told Reuters in an interview. “It’s the right thing to do.”

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The idea to spin off healthcare was not new – Flannery had floated it publicly in 2018, but never got to see it through. Financial woes at GE’s power business escalated into a crisis that caused the company to miss many profit targets and cost Flannery his job.

In the weeks that followed his appointment, Culp, a former CEO of industrial conglomerate Danaher Corp, undertook a top-to-bottom review of GE’s sprawling businesses and numerous profit-and-loss lines, people familiar with the matter said. Analysts and investors lauded him for improving GE’s profitability.

Culp decided at the time that the healthcare business, a pre-eminent supplier of medical equipment and instrumentation, was too important of a cash cow, while GE’s other two businesses were still not self-sufficient for the break-up to happen, one of the sources said.

READY FOR BREAK-UP

Still, Culp wanted to pursue the idea, and pruned GE through other deals in the mean time. These included a $30 billion merger of GE’s jet-leasing unit with Ireland’s AerCap, and the $21-billion sale of the biopharma business to Danaher.

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Now, GE’s troubled power business is finally turning a profit. The company’s renewable energy business has also been able to improve its cost structure and be in a position to capitalise on the transition to a low-carbon economy.

“We can spin healthcare, we can do that first. That business is clearly performing well. We have some preparations on the shelf from the (abandoned) IPO a few years ago,” Culp told Reuters.

“We’ve talked about some of the work we still need to do in renewables … but we’ll really be ready for this next step in early 2024.”

Hedge fund Trian Fund Management, an ally of Culp on GE’s board, lauded the latest moves, stating it “enthusiastically supports this important step in the transformation of GE.”

To be sure, Culp’s tenure at GE has not been without criticism.

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Earlier this year, GE shareholders rejected a payout for Culp of as much as $230 million in a non-binding vote.

Proxy advisory firms Institutional Shareholder Services Inc and Glass Lewis, which opposed the pay packages, argued that GE had lowered the bar on Culp’s performance targets during the COVID-19 pandemic and that his stock award was too generous.

GE countered that the payout was necessary to incentivise Culp.

(Reporting by Anirban Sen in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Greg Roumeliotis and Kenneth Maxwell)

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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins

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December 5, 2021

SAN SALVADOR (Reuters) – El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

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“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.

(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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Bitcoin falls 9.2% to $48,782

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December 4, 2021

(Reuters) – Bitcoin dropped 9.29% to $48,752.15 at 22:01 GMT on Saturday, losing $4,991.54 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 29.3% from the year’s high of $69,000 on November 10.

Ether, the coin linked to the ethereum blockchain network, dropped 3.61% to $4,070.52 on Saturday, losing $152.28 from its previous close.

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(Reporting by Juby Babu in Bengaluru; Editing by Daniel Wallis)

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Trump’s social media venture says it has raised $1 billion

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December 4, 2021

By Krystal Hu and Juby Babu

(Reuters) – Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

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Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement. They did not respond to requests to name the investors.

Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt. The social media venture is now valued at almost $4 billion based on the price of Digital World shares at the end of trading on Friday. Trump supporters and day traders snapped up the stock.

Many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE. Among those investors who participated were hedge funds, family offices and high net-worth individuals, Reuters reported on Wednesday. Family offices manage the wealth of the very rich and their kin.

Some Wall Street investors are reluctant to associate with Trump. He was banned from top social media platforms after the Jan. 6 attack by his supporters on the U.S. Capitol amid concerns he would inspire further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.

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“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

The deal also faces regulatory risk. U.S. Senator Elizabeth Warren asked Securities and Exchange Commission Chairman Gary Gensler last month to investigsate the planned merger for potential violations of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

Trump had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, according to a presentation on his company’s website.

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Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

FIRST-QUARTER ROLLOUT

Since Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency in 2024.

Special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along. Many of these investors were left with big losses after the companies that merged with SPACs failed to deliver on their ambitious financial projections.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022. It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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In a slide deck on its website, the company envisions eventually competing against Amazon.com’s AWS cloud service and Google Cloud.

(Reporting by Juby Babu in Bengaluru and Krystal Hu in New York; Editing by Daniel Wallis and Cynthia Osterman)

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