HOUSTON (Reuters) – General Electric Co (GE.N) Tuesday presented a plan to raise about $ 4 billion by accelerating a proposal to sell a stake in the oil service provider Baker Hughes (BHGE.N), his latest move to simplify his activities and reduce debt.
PHOTO FILE: A sign by Baker Hughes is exposed outside the local oil company's office in Sherwood Park, near Edmonton, Alberta, Canada, on November 13, 2016. REUTERS / Chris Helgren / Photo file
In the context of the agreement, the Boston-based industrial conglomerate will sell up to 101.2 million shares on the market and Baker Hughes will repurchase another 65 million shares from its parent company. Based on Tuesday's share price of $ 23.76, the sale would have raised about $ 3.97 billion.
Once a symbol of US entrepreneurial power, GE faltered during the 2008 financial crisis and has since replaced two CEOs. Its share price lost over 80% of its value from its highs at the beginning of 2000. After the announcement, GE shares rose 4.5% to $ 8.35, while Baker Hughes it was up by half a percentage point. The two companies have also signed a series of agreements concerning digital technology, products and debt to pave the way for the sale of shares.
GE, which bought Baker Hughes in Houston in July 2017 and agreed to maintain a 62.5% stake until mid-next year, made a series of changes to lower debt and focus on its core engine business. reaction, power plants and renewable energy.
The two will continue to share some oil and gas technologies and will close the remaining GE share in the oil company for six months.
On Monday, GE Chief Executive Officer Larry Culp said the company would sell "urgent" assets to reduce debt, as GE's shares fell 10% and the cost of securing debt reached its maximum by six years.
"The agreements announced today accelerate this plan so as to benefit both companies and their shareholders," Culp said in a statement.
The CEO of Baker Hughes, Lorenzo Simonelli, said that the agreement provides "clarity for our customers, employees and shareholders".
In June, GE announced that it will sell its stake in Baker Hughes over the next two to three years. As part of the new agreement, the companies dissolve a two-year lock-up that would have prevented GE from selling shares in Baker Hughes until July 2019.
The sale comes as the improvement in the oil markets helped Baker Hughes record a adjusted net profit for the third quarter. The oil service company also said it was optimistic about the near future with oil production in North America rising to record levels.
As part of the agreement, GE will sell an undisclosed part of its shares on the market and others will be acquired by Baker Hughes. GE will reduce its ownership to no more than 50.1 percent as part of the agreement, say the companies.
The companies will also create a joint venture focused on rotary equipment technology, primarily used in the production of liquefied natural gas, in oil and gas production, and in Baker Hughes pipeline and industrial segments. Baker Hughes said he has entered into long-term supply and distribution agreements with GE for heavy-duty gas turbine technology.
Reporting by John Benny to Bengaluru and Liz Hampton to Houston; Editing of Saumyadeb Chakrabarty and Sai Sachin Ravikumar