8-KRegulation FDOther EventsExhibits & Filings

GENERAL ELECTRIC CO 8-K Report, Regulation FD Disclosure (Nov 13, 2018)

Filed November 13, 2018For Securities:GE

Summary

General Electric Company (GE) filed an 8-K on November 13, 2018, to disclose significant changes in its relationship with Baker Hughes, a GE company (BHGE). The core of the announcement revolves around a new "Ongoing Framework" and a "Master Agreement" that fundamentally alters their partnership. Key for investors is the expiration of GE's lock-up period on BHGE shares, enabling GE to divest its holdings. This marks a strategic shift for GE as it moves away from a controlled relationship with BHGE, aiming to facilitate BHGE's transition to an independent entity. The new agreements also outline GE's reduced influence over BHGE's board representation and introduce a plan for GE to sell a substantial portion of its BHGE stake through a secondary offering, alongside a repurchase agreement where BHGE will buy back approximately $1.5 billion of GE's BHGE Class B common stock and BHGE LLC units. These actions signal GE's continued efforts to streamline its portfolio and reduce its financial entanglement with BHGE.

Key Highlights

  • 1Expiration of GE's lock-up period on Baker Hughes, a GE company (BHGE) common stock, effective November 12, 2018, allowing GE to sell its holdings.
  • 2Entry into a "Master Agreement" and "Ongoing Framework" to redefine the commercial, technological, and governance relationships between GE and BHGE.
  • 3GE's right to designate a majority of BHGE's board will cease upon GE owning less than 50% of BHGE's voting power, transitioning to a minority director nomination right if GE retains at least 20% ownership.
  • 4BHGE will facilitate an underwritten registered secondary offering by GE or its affiliates to sell BHGE Class A common stock.
  • 5BHGE and BHGE LLC have agreed to repurchase approximately $1.5 billion of GE's BHGE Class B common stock and BHGE LLC units ("Paired Interests") through an "Equity Repurchase Agreement."
  • 6These arrangements facilitate BHGE's transition from a controlled company and mark a step towards GE reducing its ownership and involvement.

Frequently Asked Questions

The expiration of the lock-up period on November 12, 2018, removes a key restriction that prevented GE from selling its shares in Baker Hughes, a GE company (BHGE). This allows GE greater flexibility to divest its stake, which is a crucial step in GE's strategy to streamline its portfolio and reduce its financial exposure.

GE's right to designate a majority of BHGE's directors will end once GE's ownership falls below 50% of the voting power. If GE retains at least 20% ownership, it will have the right to nominate one director. If ownership drops below 20%, GE will lose all board nomination rights. This signifies a significant reduction in GE's control and governance over BHGE.

Under the repurchase agreement, BHGE and BHGE LLC will buy back approximately $1.5 billion worth of GE's BHGE Class B common stock and BHGE LLC units. This provides GE with immediate cash proceeds from its BHGE investment and reduces the number of shares GE needs to sell through the secondary offering, while also reducing GE's overall stake in BHGE.

These agreements mark a significant step in GE's ongoing efforts to simplify its business and improve its financial position. By divesting a substantial portion of its BHGE stake through a secondary offering and a share repurchase, GE is reducing its ownership and control, moving BHGE towards greater independence, and generating capital that can be used for debt reduction or other strategic initiatives.