Houston-based Baker Hughes, a GE Company, and Boston-based General Electric Co. are taking the initial steps toward the separation they announced in June.
On Nov. 13, the companies announced a series of long-term agreements related to their commercial and technological relationships, according to a press release. They also agreed to release GE from the lock-up restrictions that previously prevented GE from disposing of BHGE shares until July 2019.
Additionally, another agreement calls for GE to sell part of its BHGE stake into the market and BHGE to repurchase another part of GE’s stake. Following the transactions, GE’s stake in BHGE is expected to remain above 50 percent and will be subject to a 180-day lock-up. The companies announced more details about GE’s secondary offering of 92 million shares of BHGE Class A common stock and BHGE’s repurchase of 65 million shares of BHGE Class B common stock from GE in a separate press release.
In terms of the companies’ ongoing relationships, one of the agreements calls for BHGE and GE Digital extending their exclusive supplier relationship for digital oil and gas applications, per the initial release.
Another has to do with long-term collaboration on critical rotating equipment, with the companies agreeing to form a joint venture to provide aeroderivative engine services and product management for use in the oil and gas and industrial spaces.
Several other agreements cover operations and pricing within BHGE Digital Solutions’ Controls product line, pensions, tax matters and intercompany services costs, per the release.
“Earlier this year we announced our intent to pursue an orderly separation from BHGE,” GE Chairman and CEO H. Lawrence Culp Jr. said in the release. “The agreements announced today accelerate that plan in a manner that mutually benefits both companies and their shareholders. We look forward to continuing our commercial relationship, which strengthens both GE’s and BHGE’s abilities to deliver high-value technologies and solutions to customers around the world.”
The agreements provide clarity for customers, employees and shareholders, Lorenzo Simonelli, BHGE’s chairman, president and CEO, added in the release.
“Our ability to execute and provide a differentiated investment opportunity is unchanged,” Simonelli continued. “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.”
BHGE was formed in summer 2017 through the merger of Houston-based Baker Hughes Inc. and London-based GE Oil & Gas. The combined company has dual headquarters in Houston and London, and it had 64,000 employees as of Dec. 31, the majority of whom are based outside of the U.S, according to a filing with the Securities and Exchange Commission. The company’s consolidated revenue for 2017 was nearly $17.26 billion, per the filing.