Baker Hughes to go it alone as GE seeks exit from oil sector

Bloomberg

Baker Hughes will emerge from the shadow of parent General Electric Co amid unprecedented turmoil and dislocation in the global oil business.
GE’s plan to unload its 62.5 percent stake in the oilfield-services company over the next two to three years will leave Baker Hughes in much the same place it was before the industrial conglomerate absorbed it last year: battling the behemoths of oil services — Schlumberger Ltd. and Halliburton Co. — for customers and contracts.
Since that combination, rising crude prices haven’t translated into improved results in many parts of the globe and Baker Hughes’s stock has been punished, falling 11 percent in the past 5 1/2 month. The long-term outlook for the petroleum markets that underpin demand for Baker Hughes’s drill bits and refinery valves has been clouded by conf-lict, political turbulence and economic strife in major oil-producing regions.
Against that backdrop, GE probably will divest its interest in Baker Hughes through a series of share sales rather than a corporate buyout, said Sonny Randhawa, senior analyst at Seaport Global Securities LLC. GE’s stake in Baker Hughes, which invented modern oil drilling at the dawn of the 20th century, was valued at about $23 billion.
“The only buyers would be Halliburton or Schlumberger and neither of those would get regulatory approval,” Randhawa said. “I don’t think there’s another entity coming in to buy Baker Hughes.”

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Ironically, it was just such antitrust concerns that lan-ded Baker Hughes in the arms of GE in the first place. In 2016, antitrust objections scuttled Halliburton’s plan to buy Baker Hughes, a break-up that netted the smaller company a $3.5 billion fee. The same day, GE oil and gas chief Lorenzo Simonelli emailed his counterpart at Baker Hughes to discuss a deal.
But shortly after the transaction closed in July, new GE CEO John Flannery was publicly talking about dismantling the company’s far-flung empire to boost profits and
rescue cratering shares. “Exit options” was the cryptic ph-rase he used when discussing Baker Hughes’s fate in November. Baker Hughes was “non-core” to GE’s main businesses “so it was something they were planning to always divest,” Randhawa said.