GE to lose majority control of Baker Hughes with up to US$3b share sale

GE to lose majority control of Baker Hughes with up to US$3b share sale

A screen displays the logo for Baker Hughes on the floor at the NYSE in New York
A screen displays the logo for Baker Hughes on the floor at the New York Stock Exchange (NYSE) in New York, U.S., June 24, 2019. REUTERS/Brendan McDermid

BOSTON, Massachusetts: General Electric is looking to raise up to US$3 billion in sale of majority-owned Baker Hughes shares, resulting in a reduction of the US industrial conglomerate's stake in the oilfield services provider to less than 50 per cent, Baker Hughes said on Tuesday.

Shares of Baker Hughes, in which GE owned an about 50.4 per cent stake as of Jun 30, fell 3.7 per cent to US$23.20 in after hours trading, while GE's were marginally up at US$9.15.

GE had long planned to sell down its stake in Baker Hughes.

But the issue came under scrutiny last month when Madoff whistleblower Harry Markopolos issued a lengthy report that alleged in part that GE was improperly counting Baker Hughes' income, capital and cash in GE's financial statements.

GE has said its accounting was appropriate since it is the majority shareholder.

Baker Hughes said GE would sell up to 120.75 million shares, including over-allotment option, of Baker Hughes' Class A common in a secondary offering. Baker Hughes will additionally repurchase US$250 million of Class B common stock from GE in a private transaction.

GE currently owns about 522 million shares of Baker Hughes, and has said previously that a reduction in its ownership interest below 50 per cent in Baker Hughes will result in GE 'deconsolidating' its oil and gas business.

GE's cash generation has failed to keep pace with earnings in recent years, causing the company to cut its dividend and divest non-core assets in order to raise billions of dollars in cash to meet its financial obligations.

Baker Hughes said the deal would also shrink the industrial conglomerate's presence on the oilfield services company's board to one seat from five.

General Electric wants John Rice to be its designated member on the Baker Hughes board, while Lorenzo Simonelli and Geoffrey Beattie are expected to continue as directors, but not as GE representatives.

Source: Reuters

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