Executed Through Public Offering of BHGE Shares and Concurrent Private Sale to BHGE of Ownership Interests in BHGE; Building on Several Steps GE Has Taken To Strengthen Its Balance Sheet
BOSTON – September 11, 2019 - GE (NYSE: GE) announced today the reduction of its ownership in Baker Hughes, a GE company (“BHGE”) through a public offering (the “offering”) of 115 million shares of Class A common stock, par value $0.0001 per share (the “Class A common stock”), of BHGE and a concurrent private sale to BHGE of ownership interests in BHGE.
The offering upsized and priced today at a price to the public of $21.50 per share. The underwriters have a 30-day option to purchase up to an additional 17.25 million shares of Class A common stock from GE or one or more of its affiliates. The offering is expected to close on September 16, 2019, subject to customary closing conditions.
In addition, GE is selling to BHGE, in a privately negotiated transaction, $250 million of shares of BHGE Class B common stock, par value $0.0001 per share, together with an equal number of associated membership interests of Baker Hughes, a GE company, LLC (the “repurchase”), at a price equal to the price per share at which the underwriters will purchase shares of Class A common stock from GE in the offering. The repurchase is expected to be completed immediately following the offering on September 16, 2019. Although the repurchase is conditioned upon the closing of the offering, the closing of the offering is not conditioned upon the closing of the repurchase.
Combined net proceeds of the offering and the repurchase will be approximately $2.7 billion, or approximately $3.0 billion assuming full exercise of the underwriters’ option to purchase additional shares in the offering.
GE Chairman and CEO H. Lawrence Culp, Jr., said, “Reducing GE’s ownership in BHGE continues our efforts to improve our financial position by generating approximately $2.7 billion in net proceeds to GE. This offering builds on several recent deleveraging steps we have taken, and we will continue to take action in 2019 and 2020 to achieve our leverage targets.”
Upon completion of the transactions, GE and its affiliates will hold approximately 38.4% of BHGE’s outstanding voting stock. GE will no longer have a controlling interest in BHGE and expects to continue to divest the remainder of its BHGE holdings in an orderly fashion over time.
As GE has previously disclosed, upon the reduction of GE’s holdings to less than 50% of the voting power of BHGE’s outstanding voting stock, GE will deconsolidate BHGE, reclassify BHGE’s historical operations as a discontinued operation, and account for the remaining investment in BHGE at fair value by marking to market our remaining investment as of the last day of each reporting period.
As GE has also previously disclosed, GE expects to recognize a significant loss in earnings as a result of ceding control of BHGE, which it will reflect in its third-quarter 2019 results. GE will determine the final amount of this non-cash charge, as well as the impact of deconsolidating BHGE on its 2019 outlook framework, based on information available as of the end of the third quarter, and will disclose this information when it reports third-quarter 2019 results on October 30, 2019.
The final amount of this charge will depend on several factors, the most significant of which is BHGE’s stock price as of the time the offering closes. It will also be impacted by realized proceeds for the offering and changes in carrying value of BHGE since June 30, 2019 through the time the offering closes.
In July 2019, GE estimated the loss upon deconsolidation of BHGE would be approximately $7.4 billion, based upon BHGE’s share price of $24.84 as of July 26, 2019. A change in the BHGE share price of $1, as of the relevant determination date, would increase or decrease the estimated loss by approximately $500 million, based on GE’s ownership of approximately 500 million BHGE shares immediately prior to closing of the offering, before being impacted by the amount of realized proceeds from the offering and changes in carrying value of BHGE.
Upon close of the transaction, GE will also reduce the number of its representatives on BHGE’s Board of Directors from five to one. John G. Rice is expected to remain on BHGE’s board of directors as GE’s representative.
Caution Concerning Forward Looking Statements:
This document contains “forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," “estimate,” “forecast,” "target," “preliminary,” or “range.”
Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, the risk factors that are described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019 and the risk factors that are described in “Forward-Looking Statements” in BHGE’s most recent earnings release or SEC filings. These documents are available through our website or through the SEC’s Electronic Data Gathering and Analysis Retrieval system at http://www.sec.gov.
These or other uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
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