General Electric (GE) has signed an agreement to divest 12% of its interest in oilfield services company Baker Hughes, a GE company (BHGE), in order to raise $4bn to reduce debt and strengthen its balance sheet.
Under the terms of the agreement, GE will reportedly sell around 166 million shares in BHGE, including 101 million shares to the market through a secondary offering. The remaining 65 million shares will be repurchased by BGHE.
GE currently holds a 62.5% stake in BHGE. Following the transaction, the company is expected to own 50% of the oilfield services firm.
The agreement seeks to accelerate the plan announced by GE in June to sell its stake in the company over two to three years in order to simplify its corporate structure.
The terms of the agreement also include a 180-day lock-up on the sale of GE’s remaining stake without consent from the underwriting banks.
GE chairman and CEO Lawrence Culp said: “Earlier this year, we announced our intent to pursue an orderly separation from BHGE. The agreements, announced today, accelerate that plan in a manner that mutually benefits both companies and their shareholders.
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By GlobalData“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.”
In a bid to fast-track the shares sale, the conglomerate negotiated a deal related to a release from the lock-up restrictions that were previously valid until next July.
The separation from BHGE will allow GE to focus on its aviation, power and renewable energy businesses.
BHGE and GE also reached an agreement to collaborate on critical rotating equipment, including aero-derivative and heavy-duty gas turbine technology.
The companies will establish a joint venture (JV) to provide aero-derivative engine services and product management for the oil and gas and industrial sectors.
BHGE uses the jet engine technology in its LNG, on-and-offshore production, pipeline and industrial segments.
The agreements also give BHGE access to GE Digital software and technology.
