GE, Baker Hughes Announce Amendments; GE To Sell Up To 20% Of BHGE Stake

Baker Hughes A GE Co BHGE, a division of General Electric Company GE, announced Tuesday multiple long-term agreements to maximize value for both Baker Hughes and its parent company.

What Happened

Baker Hughes and GE said the two entities established a new commercial and technological relationship that focuses on:

• A long-term collaboration on critical rotating equipment.
• Giving Baker Hughes access to GE's digital software and technology.
• New agreements relating to operations and pricing within Baker Hughes' Digital Solutions' Controls product line, pensions, tax matters and services costs.

The entities also agreed on a release from the lock-up restrictions under their stockholders agreement, which prevented GE from disposing its stake in Baker Hughes' common stock until July 2019. GE will sell up to 20 percent, or about 101 million shares, of its BHGE holding. This would provide GE with about $4 billion.

The agreement is consistent with GE's prior plans to pursuing a separation from Baker Hughes.

Why It's Important

Baker Hughes CEO Lorenzo Simonelli said Tuesday's announcement should offer clarity for its customers, employees and shareholders.

"Our ability to execute and provide a differentiated investment opportunity is unchanged," Simonelli said. "Importantly, there will be no material impact to our outlook, strong balance sheet, or ability to generate cash. We remain well positioned to capitalize on the positive outlook for our industry and are focused on our top priorities of gaining share, improving margins and generating cash."

GE CEO Lawrence Culp said the company will continue its commercial relationship with Baker Hughes, which "strengthens both GE's and BHGE's abilities to deliver high-value technologies and solutions to customers around the world."

GE shares traded up about 1 percent in the pre-market session. The stock was dropped more than 50 percent this year.

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Photo courtesy of GE.