What are the main transactions being finalized with General Electric?

Baker Hughes is finalizing agreements to form a joint venture for aero-derivative gas turbine products and services, and to sell its Industrial Steam Turbine (IST) business to a GE affiliate. These are part of the broader Master Agreement between the two companies.

What are the financial implications of the aero-derivative gas turbine joint venture?

Baker Hughes will contribute $60 million to the new 50/50 joint venture to equalize ownership between Baker Hughes and GE. The JV will focus on developing and supplying aero-derivative gas turbine engines, parts, and services.

What is being sold as part of the Industrial Steam Turbine (IST) business divestiture?

Baker Hughes is selling certain assets, liabilities, and employees related to its Industrial Steam Turbine business to a GE affiliate. Baker Hughes will make a $13 million cash payment for this transfer, which is subject to adjustments based on the working capital of the IST business at closing.

How does this agreement affect Baker Hughes' role in distributing GE's gas turbines?

An amended and restated agreement designates Baker Hughes as GE's exclusive distributor for heavy-duty gas turbine units and associated services within the oil and gas industry. This appointment has initial terms of five years for products and 20 years or the operating life for services.

When are these transactions expected to close?

The transactions are expected to close in mid-2019, specifically in the second quarter for the IST sale, and contingent upon the "trigger date" (the later of July 3, 2019, or when GE ceases to own over 50% of Baker Hughes' voting power) for the JV, pending regulatory approvals like HSR.

BKR 8-K: Material Agreements

Summary

This 8-K filing by Baker Hughes Co. (BKR) on February 27, 2019, details the definitive agreements reached with General Electric Company (GE) concerning their Master Agreement. The core of the report outlines the formation of a new joint venture (JV) focused on aero-derivative gas turbine products and services, alongside the divestiture of Baker Hughes' Industrial Steam Turbine (IST) business to an affiliate of GE. These transactions represent a significant restructuring of the relationship and asset allocation between the two entities. Key financial implications for investors include the $60 million payment from Baker Hughes to GE to equalize ownership in the aero-derivative JV, and a $13 million payment from Baker Hughes in connection with the IST business sale, subject to working capital adjustments. The filing also clarifies GE's amended and restated distribution and supply agreement for heavy-duty gas turbines within the oil and gas industry, appointing Baker Hughes as an exclusive distributor. These agreements are structured to close in mid-2019, pending regulatory approvals, signifying a strategic realignment of GE's involvement with Baker Hughes.

Key Highlights

1Definitive agreements signed with GE to finalize previously announced transactions.
2Formation of a 50/50 joint venture (JV) for aero-derivative gas turbine products and services, with Baker Hughes contributing $60 million.
3Sale of Baker Hughes' Industrial Steam Turbine (IST) business to a GE affiliate for $13 million, subject to working capital adjustments.
4Amended and restated distribution and supply agreement appoints Baker Hughes as exclusive distributor for GE's heavy-duty gas turbines in the oil and gas sector.
5Transactions subject to customary closing conditions, including regulatory approvals, with expected closing in mid-2019.
6The "trigger date" for closing is the later of July 3, 2019, or when GE no longer beneficially owns more than 50% of Baker Hughes' voting power.

Baker Hughes Co 8-K Report, Material Agreement (Feb 28, 2019)

Summary

Key Highlights

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