More corporate breakups are on the way after GE and J&J as conglomerate model ends, top analyst says

Published Fri, Nov 12 202112:42 PM ESTUpdated Fri, Nov 12 20212:32 PM EST

Jesse Pound @/in/jesse-pound @jesserpound

The spinoffs from major U.S. companies this week shouldn't come as any surprise to investors and more moves may be on the horizon, according to one of Wall Street's top corporate strategy analysts. Don Bilson, the head of event-driven research at Gordon Haskett, told CNBC on Friday that the landmark splits announced by GE and Johnson & Johnson were the next logical steps in the shift away from conglomerates in corporate America. "It's really a continuation of what we've seen for many years now. ... This has been the ongoing trend for several years now, and clearly GE was already moving down this path in a big way," Bilson said. "JNJ was a little bit more surprising than GE, which was more kind of an inevitable situation. I don't really know if anything drove them to this point right now, before 2021 ended, I just think this was where all roads were leading." Bilson has written multiple times this year about a potential spinoff at J & J, and said in a note on Friday that a major question about the move was not why it happened but why it was a two-way split instead of three. The announcements have been met with positive reaction from analysts but only moderate moves higher for the stock price. The J & J move to split into health care and consumer products companies comes at a time when neither sector has major momentum in the stock market, but Bilson said moves of this size are hard to time with market trends. "It's going to be hard for any of these companies just to nail it perfectly. GE is isolating their aviation business , which is at its absolute low right now. I don't really think there's an opportunistic angle to either of these moves," Bilson said. Instead, the "timing was right" due to the looming CEO turnover at J & J and long-term build toward this at GE, according to Bilson. Bilson said he expected the trend to continue in the years ahead, pointing to Honeywell and Disney ( separating ESPN? ), among others, where analysts and investment bankers have speculated a break-up might make sense. In fact, J & J wasn't even the only major health care industry news on Friday, as Bloomberg News reported that LabCorp was discussing a potential transaction with Syneos Health. "This attention shouldn't just be shined on the names everybody names. This is kind of filtering its way down through the rest of the S & P 500 as well," Bilson said. -CNBC's Michael Bloom contributed to this report.

A bottle of Johnson & Johnson's brand lotion for sale at a pharmacy in Salt Lake City, Utah, on Thursday, Feb. 25, 2021.

George Frey | Bloomberg | Getty Images

The spinoffs from major U.S. companies this week shouldn't come as any surprise to investors and more moves may be on the horizon, according to one of Wall Street's top corporate strategy analysts.