By Thomas Gryta
General Electric Co. is giving up majority control of Baker Hughes, selling shares in the oil-field services firm that will raise about $3 billion cash but trigger a more-than-$7-billion accounting charge.
GE executives have said they planned to wind down their stake in the business, which GE acquired when it merged its struggling oil and gas division with Baker Hughes in a 2017 deal. The combination created a new public company that was 62.5% owned by GE.
GE has been selling its stake to both exit the business and raise cash to pay down its debt load. Last year, GE sold a $4 billion stake and recorded a $2.2 billion loss on the transaction, which reduced its ownership from 62.5% to 50.2%.
Based on the current share price of Baker Hughes, GE could bring in about $2.9 billion from the latest sale. With a 105-million-share secondary offering and a $250 million stock- buyback by Baker Hughes, GE's stake will fall below 40%.
GE will no longer include the financial results of Baker Hughes with its own and will have to take an accounting charge estimated to be $7.4 billion as of July 24. The final proceeds and size of the charge will depend on the offering's pricing.
The charge is necessary because the market value of the Baker Hughes stake has dropped compared with how GE was carrying it. GE's stake was worth about $12.5 billion at Tuesday's closing price.
Baker Hughes shares closed Tuesday at $24.11; two years ago the stock traded at almost $37. The stock fell nearly 4% in late trading.
A GE spokeswoman pointed to Baker Hughes' regulatory filing and prior public comments.