Baker Hughes, a GE company (NYSE:BHGE) (“BHGE” or the “Company”)
and General Electric Company (NYSE:GE) (“GE”) jointly announced
today the entry into a series of long-term agreements (the
“Agreements”) that amend the commercial and technological
relationships between the two companies. The Agreements focus
on:
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- Long-term collaboration on critical
rotating equipment, including aeroderivative and heavy-duty gas
turbine technology.
- BHGE access to GE Digital software and
technology.
- A series of agreements relating to
operations and pricing within BHGE Digital Solutions’ Controls
product line, pensions, tax matters and intercompany services
costs.
Lorenzo Simonelli, BHGE’s Chairman, President and Chief
Executive Officer, said, “We are very pleased with the agreements
we have reached with our partners at GE. They provide clarity for
our customers, employees and shareholders. Our ability to execute
and provide a differentiated investment opportunity is unchanged.
Importantly, there will be no material impact to our outlook,
strong balance sheet, or ability to generate cash. We remain well
positioned to capitalize on the positive outlook for our industry
and are focused on our top priorities of gaining share, improving
margins and generating cash.”
GE Chairman and CEO H. Lawrence Culp, Jr., said, “Earlier this
year we announced our intent to pursue an orderly separation from
BHGE. The agreements announced today accelerate that plan in a
manner that mutually benefits both companies and their
shareholders. We look forward to continuing our commercial
relationship, which strengthens both GE’s and BHGE’s abilities to
deliver high-value technologies and solutions to customers around
the world.”
The BHGE Conflicts Committee, a subcommittee of the BHGE Board
of Directors consisting solely of non-GE designated independent
directors, approved the Agreements following the negotiations with
GE. GE’s Board of Directors also has approved the Agreements.
BHGE and GE also agreed on a release from the lock-up
restrictions under their stockholders agreement that previously
prevented GE from disposing of shares of BHGE common stock until
July 2019.
BHGE and GE agreed to cooperate on a proposed sale by GE of part
of its stake into the market and to a concurrent repurchase of
another part of GE’s stake by BHGE. Together, these transactions
are expected to maintain GE’s stake in BHGE above 50%. GE’s
remaining stake will be subject to a 180-day lock-up prohibiting
further sales into the market without consent from the underwriting
banks.
Agreement Highlights
Secured long-term collaboration on
critical rotating equipment
Under the terms of the Agreements, BHGE has defined the
parameters for long-term collaboration and partnership with GE on
critical rotating equipment technology.
BHGE and GE have agreed to form a Joint Venture (“JV”) to
provide aeroderivative engine services and product management for
use in the oil and gas and industrial spaces. The jet engine
technology is mainly used in BHGE’s LNG, on-and-offshore
production, pipeline and industrial segments within its
Turbomachinery & Process Solutions (“TPS”) segment, and by GE
in its power generation business.
Through the new JV, BHGE will continue to benefit from
world-class jet engine technology. BHGE and GE will contribute
certain assets and inventory into the JV and both companies will
jointly control operations. The JV will have a supply and strategic
collaboration agreement with GE Aviation with revised and extended
pricing arrangements.
In parallel, BHGE has also entered into long-term supply and
distribution agreements with GE for heavy-duty gas turbine
technology at the current pricing levels. The agreements will
become effective at the later of (i) July 3, 2019 and (ii) the date
on which GE and its direct subsidiaries cease to beneficially own,
in the aggregate, more than 50% of the outstanding voting power of
BHGE’s outstanding common stock (the “Trigger Date”).
The aeroderivative and heavy-duty gas turbine technologies are
important components of BHGE’s TPS offerings and the long-term
agreements provide clarity on the commercial approach and customer
fulfilment.
Preserved access to GE Digital software
& technology
As part of the Agreements, BHGE and GE Digital have agreed to
extend their exclusive supplier relationship for digital oil and
gas applications.
Other key agreements
- BHGE and GE agreed to maintain current
operations and pricing levels with regards to the Controls product
line BHGE offers within its Digital Solutions segment for the four
years commencing on the Trigger Date.
- GE will transfer to BHGE certain UK
pension liabilities on what is intended to be a fully funded basis.
No liabilities associated with GE’s primary U.S. pension plan will
be transferred to BHGE.
- The current Tax Matters Agreement with
GE that was negotiated at the time of the merger between Baker
Hughes Incorporated and GE Oil & Gas (the “Merger”) in July
2017 will remain largely in place and both companies retain the
ability to monetize certain tax benefits.
- The intercompany services fee that BHGE
agreed to pay to GE as part of the Merger will be reduced over time
beginning on January 1, 2019.
- BHGE and GE agreed to amend the terms
of their stockholders agreement to provide that (i) GE’s right to
nominate five directors to BHGE’s nine-person board will continue
until the Trigger Date, and (ii) GE will have a right to nominate
one director to the BHGE board following the Trigger Date until GE
ceases to own at least 20% of the voting power of BHGE’s
outstanding common stock.
About Baker Hughes, a GE company
BHGE is the world’s first and only fullstream provider of
integrated oilfield products, services and digital solutions. We
deploy minds and machines to enhance customer productivity, safety
and environmental stewardship, while minimizing costs and risks at
every step of the energy value chain. With operations in over 120
countries, we infuse over a century of experience with the spirit
of a startup – inventing smarter ways to bring energy to the
world.
About GE
GE drives the world forward by tackling its biggest challenges.
By combining world-class engineering with software and analytics,
GE helps the world work more efficiently, reliably, and safely. For
more than 125 years, GE has invented the future of industry, and
today it leads new paradigms in additive manufacturing, materials
science, and data analytics. GE people are global, diverse, and
dedicated, operating with the highest integrity and passion to
fulfill GE’s mission and deliver for our customers.
Cautionary Statement About Forward-Looking Statements
This news release contains “forward-looking statements” as that
term is defined in Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Exchange
Act. All statements, other than historical facts, including
statements regarding the presentation of our operations in future
reports and any assumptions underlying any of the foregoing, are
forward-looking statements. Forward-looking statements concern
future circumstances and results and other statements that are not
historical facts and are sometimes identified by the words “may,”
“will,” “should,” “potential,” “intend,” “expect,” “endeavor,”
“seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,”
“believe,” “could,” “project,” “predict,” “continue,” “target” or
other similar words or expressions. Forward-looking statements are
based upon current plans, estimates and expectations that are
subject to risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those indicated or anticipated by such forward-looking
statements. The inclusion of such statements should not be regarded
as a representation that such plans, estimates or expectations will
be achieved.
Important factors that could cause actual results to differ
materially from such plans, estimates or expectations include,
among others, the risk factors identified in the “Risk Factors”
section of the BHGE and GE Annual Reports on Form 10-K for the year
ended December 31, 2017, each quarterly company’s Quarterly Reports
on Form 10-Q for the quarterly period ended March 31, 2018, the
quarterly period ended June 30, 2018 and the quarterly period ended
September 30, 2018 and those set forth from time-to-time in other
filings by BHGE and GE with the SEC. These documents are available
through our respective websites or through the SEC’s Electronic
Data Gathering and Analysis Retrieval system at
http://www.sec.gov.
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Baker Hughes, a GE
companyInvestor Relations:Philipp Mueller, +1
281-809-9088investor.relations@bhge.comorMedia Relations:Melanie
Kania, +1 713-439-8303melanie.kania@bhge.comorGEInvestor Contact:Todd Ernst, +1
617-443-3400todd.b.ernst@ge.comorMedia Contact:Jennifer Erickson,
+1 646-682-5620jennifer.erickson@ge.com
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