General Electric Announces Long-Term Agreements With Subsidiary Baker Hughes In Order to Maximize Overall Value

General Electric and one of its subsidiaries, Baker Hughes, have announced that they are entering into a process to negotiate long-term agreements aimed at amending their commercial and technological relationships. The agreements they have reached will focus on three things: 1) achieving long-term collaboration, mostly on critical rotating equipment (which includes aeroderivative and heavy-duty gas turbines); 2) Baker Hughes (BHGE) access to General Electric (GE) Digital software and technology; and 3) Several agreements that relate to operations and pricing inside of BHGE Digital Solutions Controls product line, tax issues, intercompany service costs, and pensions.

According to BHGE Chairman, President, and Chief Executive Officer, Lorenzo Simonelli, the agreements help to clarify things for employees, shareholders, and customers alike.  He explains that these agreements improve their ability to provide more varied investment opportunities. More importantly, he continues, the contracts will not materially affect company outlook, the strong balance sheet, or their ability to produce cash flow. He concludes by remarking that BHGE will be able to hold their position for capitalizing on a positive outlook in the industry and to focus on prioritizing boosting shares, generating cash, and increasing margins.

Similarly, GE Chairman and CEO, H. Lawrence Culp, Jr note that the present agreements accelerate the announcement made earlier in the year regarding their intention to “pursue an orderly separation” from the subsidiary.  He comments that the new agreements will not only speed up the process but will, more importantly, be mutually beneficial to both companies as well as their respective shareholders.  Culp concludes that continuing their commercial relationship will strengthen both BHGE’s and GE’s ability to deliver the highest-value technologies and solutions to all of their global customers.

In addition, GE and BHGE agreed to release stockholder restrictions from a previous lock-up, a process which had prevented GE from ridding themselves of BHGE common stock at the time, which had have remained until July 2019.

Finally, the two companies have agreed to cooperate based on a proposed sale by GE, who had wanted to put its stake into the market and then repurchase another part of the GE stake.