HOUSTON & BOSTON -- (Business Wire)
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.
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BHGE access to GE Digital software and technology.
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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
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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.
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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.
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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.
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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.
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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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Contacts:
Baker Hughes, a GE company
Investor
Relations:
Philipp Mueller, +1 281-809-9088
investor.relations@bhge.com
or
Media
Relations:
Melanie Kania, +1 713-439-8303
melanie.kania@bhge.com
or
GE
Investor
Contact:
Todd Ernst, +1 617-443-3400
todd.b.ernst@ge.com
or
Media
Contact:
Jennifer Erickson, +1 646-682-5620
jennifer.erickson@ge.com
Source: Baker Hughes, a GE company
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