(Adds background on GE, closing share price)
SEATTLE, June 14 (Reuters) - General Electric Co said on Wednesday it will combine its power and energy distribution businesses to create its largest unit by revenue as the top executive at GE Power announced his retirement after failing to win the conglomerate's CEO job.
The changes come just two days after Steve Bolze, a 24-year GE veteran who heads the power unit, lost out to John Flannery, chief of GE's Healthcare division, as successor to CEO Jeff Immelt, which GE announced on Monday.
Flannery, who takes over Aug. 1, is conducting a review of GE's business, which include jet engines, power plants, locomotives and medical scanners.
The review could lead to further slimming of GE's portfolio, after it sold its finance, appliances and NBCUniversal units in recent years. Flannery said GE is sticking with its strategy of using software to increase the value of industrial equipment.
Bolze, 54, will step aside on July 3 for GE Energy Connections chief Russell Stokes, a 20-year GE veteran who will lead the combined business under the name GE Power. Stokes is 45.
Combining GE Power with the unit that provides power distribution and conversion equipment will create a division with $41.9 billion in revenue, making it GE's largest, accounting for 30 percent of its industrial revenue.
GE changes CEOs rarely and naming a new leader typically prompts the departure of those passed up for the top job. When Immelt took the title in 2001, prominent executives including Jim McNerney and Bob Nardelli left. McNerney went on to lead Boeing Co while Nardelli headed Home Depot Inc and Chrysler.
"The brain drain is more muted this time," said Deane Dray, an analyst at RBC Capital Markets.
Bolze said in a letter to employees that he had told Immelt he would retire if he was not chosen to lead the company.
Merging the energy connections unit into GE Power is not likely to significantly alter earnings or cash flow, so was not a major concern to investors, Dray added.
GE stock closed up 0.8 percent at $28.69 on the New York Stock Exchange.
The company plans to sell the lighting business that is part of the energy connections unit, reducing revenue. It will report results for the combined GE Power unit in the third quarter. (Reporting by Alwyn Scott; Editing by Chizu Nomiyama and Bill Rigby)