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Structural changes in the oil…

Flailing GE Moves To Ditch Stake In Baker Hughes

Offshore Baker Hughes

GE plans to divest its 62.5-percent stake in oilfield services provider Baker Hughes over the next two to three years, as part of a plan unveiled on Tuesday to reduce debt and focus on aviation, power, and renewables.

In July last year, GE completed its acquisition of the Baker Hughes stake, combining it with its oil and gas business. Baker Hughes is one of the world’s biggest oilfield equipment and service providers together with Schlumberger and Halliburton.

But Baker Hughes’ new majority owner, GE, has been struggling to reward shareholders and has been seeking ways to cut debt and find renewed focus on a few businesses rather than its current sprawling conglomerate of operations.

The sale of the Baker Hughes stake is part of the new strategy of new chief executive John Flannery who replaced Jeffrey Immelt last year. The strategy also includes the spin-off of GE Healthcare into a standalone company, by generating cash from the sale of some 20 percent of GE Healthcare and distributing the remaining 80 percent to GE shareholders through a tax-free distribution.

The sale of Baker Hughes, the GE Healthcare spin-off, and the focus on aviation, power, and renewable energy will be aimed at helping GE to cut its debt by US$25 billion. The company also looks to generate at least US$500 million in corporate savings by the end of 2020.

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“Today’s actions unlock both a pure-play healthcare company and a tier-one oil and gas servicing and equipment player. We are confident that positioning GE Healthcare and BHGE outside of GE’s current structure is best not only for GE and its owners, but also for these businesses, which will strengthen their market-leading positions and enhance their ability to invest for the future, while carrying the spirit of GE forward,” CEO Flannery said in a statement.

GE—one of the original components of the Dow Jones Industrial Average (DJIA) index in 1896 that has been a continuous member of the blue-chip index since 1907—is out of the DJIA index prior to the open of trading on
Tuesday, June 26.

After the new strategy was announced on Tuesday, GE shares were up more than 5 percent at 7:39 a.m. EDT in pre-market trade.

By Tsvetana Paraskova for Oilprice.com

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