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
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.
About GE
GE (NYSE: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.
www.ge.com
GE’s Investor Relations website at
www.ge.com/investor and our corporate blog at
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amount of information about GE, including financial and other
information for investors. GE encourages investors to visit these
websites from time to time, as information is updated and new
information is posted.
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version on businesswire.com: https://www.businesswire.com/news/home/20190911005820/en/
Investors: Steve Winoker, 617.443.3400 swinoker@ge.com
Media: Mary Kate Mullaney, 202.304.6514
marykate.nevin@ge.com
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