According to reports, GE will initially bring its stake in the company down from 62.5% to 38.4% in a move that it expects will generate $2.7bn in funding.
As part of this, GE has made a public offering of 115 million shares of Baker Hughes’ Class A common stock at a price of $21.50 each and will also sell $250m of Baker Hughes’ Class B common stock. GE will still have a controlling stake in the company but will eventually sell that too.
GE CEO Lawrence Culp said: “Reducing GE’s ownership in Baker Hughes continues our efforts to improve our financial position by generating approximately $2.7bn in net proceeds to GE. This offering builds on several recent deleveraging steps we have taken, and we will continue to take action in 2019 and 2020 to achieve our leverage targets.”
As a result of the news, GE’s stock rose by over 2% from $9.14 to $9.36 a share, giving it a current market capitalisation value of $81.7bn. The company’s share had peaked at $10.88 a share on 27 February, but fell to $8.01 on 16 August after financial investigator Harry Markopolos accused the company of accounting fraud.
GE share price in 2019
Meanwhile Baker Hughes’ share price dropped by over 7.5% from $24.11 to $22.29 a share, some way down from the company’s peak of $28.46 a share on 21 March.
Baker Hughes share price in 2019
Under CEO Lawrence Culp, GE has begun a process of restructuring its businesses by selling off a number of its assets to cut the company’s debt, which was estimated to be $115bn towards the end of 2018.
In its 2019 second quarter (Q2) results, GE’s oil and gas assets made $6bn in revenue, giving it an adjusted profit of $217m. According to data analytics company GlobalData, GE made a total loss of over $20bn in 2018.
Operating in the US and a key part of GE since 2017, Baker Hughes operates 1045 rigs in the US and Canada alongside 1138 across the rest of the world.
In 2018 the company had a revenue of $22.8bn with a net income of $195m, it currently has a market capitalisation value of $23.1bn.