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GE Will No Longer Be Baker Hughes Majority Owner

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GE Will No Longer Be Baker Hughes Majority Owner

General Electric Company (NYSE: GE) said Tuesday afternoon it will cease a majority interest in Baker Hughes A GE Co (NYSE: BHGE).

What Happened

GE's ownership stake of Baker Hughes stands at around 522 million shares, or 50.4% of the company. GE will sell up to 120.75 million Baker Hughes shares in a secondary offer and Baker Hughes will buy $250 million worth of shares from GE in a separate transaction, according to Reuters.

GE's announcement is consistent with the company's prior remarks it wants to lower its stake in Baker Hughes. The transaction should net GE a cash inflow of around $3 billion but simultaneously result in an accounting charge of more than $7 billion, The Wall Street Journal reported. The accounting charge is attributed to the lower market value of GE's stake of Baker Hughes compared with how the company was carrying it.

Why It's Important

GE CEO Larry Culp continues to look for ways to raise capital to help lower its $100 billion debt load. Prior asset sales include the sale of its airplane finance business of GE Capital while a deal to sell its biotech business to Danaher remains ongoing.

Gordon Haskett analyst John Inch told Benzinga the deal may suggest GE very much needs a cash boost or the cash flow outlook may not be as upbeat as the company previously hoped for.

Once completed, GE will no longer hold a voting majority in Baker Hughes and will reduce the number of directors it can designate to Baker Hughes board from five to just one. GE already indicated it wants its gas power head John Riceto to remain its sole representative on Baker Hughes board.

Baker Hughes traded down about 2.5% Wednesday morning.

Related Links:

Citi: General Electric's Recovery 'Could Be More Significant' Than Investors Realize

Morgan Stanley: GE's Core Strengths Offset By 'Opaque Potential Cash Needs'

Latest Ratings for BHGE

DateFirmActionFromTo
Sep 2019MaintainsOutperform
Aug 2019MaintainsOutperform
May 2019MaintainsOutperformOutperform

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