The deal will see Danaher pay $21 billion in cash, as well as assume certain GE pension liabilities.
The GE Life Sciences unit will join Danaher's Life Science as a stand-alone business. The GE biopharma unit is expected to generate about $3.2 billion in revenue this year. Danaher expects the deal to be complete by the fourth quarter.
GE shares traded as high as $11.75 a share in early trading before shedding some gains to close up 6.4 percent at $10.82 a share. Danaher's stock also jumped 8.5 percent to close at $123.15 a share.
"We are focused on completing the carve out [of the biopharma business] – which is 15 percent of the $20 billion healthcare segment – and focused on managing the remaining core business," GE Chairman and CEO Larry Culp told CNBC's Morgan Brennan.
Cowen Research said in a note to investors that this deal came at "a rich valuation that goes a long way towards GE's debt reduction."
"Sale of biopharma a positive," Credit Suisse said in a note. "Under CEO Culp, GE has been accelerating its strategy to strengthen and deleverage the balance sheet."
Additionally, GE announced plans to provide shareholders with its 2019 forecast on March 14.
Culp told CNBC that GE decided to break up the Life Sciences unit as the biopharma business is distinct from the pharmaceutical diagnostics business.
"IPO of healthcare was Plan A – but we got lots of inbound calls about this business and this is clearly a superior path," Culp told CNBC's David Faber.
Culp, who led Danaher for more than a decade, joined GE's board last February. Danaher approached GE with interest in acquiring the Life Sciences business last April, The Wall Street Journal reported, but GE did not pursue a deal. At the time, GE Chief Financial Officer Jamie Miller said GE had been attracting interest on some of its business units but was "looking to do deals that are smart for the company."
Under Culp, Danaher built its Life Sciences business into a major asset, which is now worth $6.5 billion. Culp was made GE Chairman and CEO in October, after GE's board of directors became frustrated with the pace of changes under former CEO John Flannery.
The deal's inclusion of some GE pension liabilities will be welcome news to investors. GE has hundreds of thousands of former and current employees covered by pension plans. At the end of 2018, pensions represented $21 billion of GE's $55 billion in industrial debt.
"We have too much debt," Culp said.
GE also on Monday closed the merger of its transportation business with Wabtec. GE received $2.9 billion in cash for the merger.