GE will sell more shares in Baker Hughes, which it acquired in 2017, and this will reduce its stake in the oilfield services provider below 50 percent, the company said in a statement.
The parent company will offer some 105 million shares to potential buyers with an option for an additional placing of 15.75 million shares. According to Reuters, the sale could fetch as much as $3 billion.
At the same time, Baker Hughes will repurchase stock worth some $250 million in a private deal with GE.
Bloomberg notes the deal will be painful for GE. Baker Hughes' stock closed at $24.11 apiece yesterday. That's down from over $50 per share in the year when GE acquired the company. Two months ago, GE estimated it would have to book a writedown of $7.4 billion on the Baker Hughes acquisition. The $3 billion expected to be raised via the share sale would help the company reduce the losses but not completely offset them.
GE recently saw its own stock take a plunge, after a report from notorious whistleblower Harry Markopolos accused the conglomerate of accounting fraud on a scale similar to the Enron scandal.
The report concerned, among other things, GE's approach to the accounting needs of Baker Hughes. What's more, it came on the heels of a lawsuit related to the merger of Baker Hughes into GE's own oil and gas business, which cost almost $8 billion and gave GE a stake of 62.5 percent in the oilfield services company. As a result of the accounting fraud, according to the Markopolos report, GE was "on the verge of insolvency."
However, it turned out the report was commissioned by an unnamed entity that had interest in GE's stock declining. For now, GE appears to be still standing, even if it is cutting its control of Baker Hughes.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More