Baker Hughes, General Electric May Accelerate Parting Process

Baker Hughes, a GE company (NYSE:GE) announced that 92 million of its class A common shares will be sold by General Electric Company (NYSE:GE) in a secondary offering. The leading oilfield service player added that additional 9.2 million class A stocks will be purchased by the underwriters if they execute their 30-day options.

In addition to this, Baker Hughes has decided to buy back 65 million of its class B common stocks from General Electric. Overall, the transaction that includes the divestment of 166.2 million Baker Hughes shares, through both stock buy-back program and secondary offering, will likely fetch General Electric nearly $4 billion in cash.

It is to be noted that with the closure of the deal, the ownership stake of General Electric in Baker Hughes will drastically fall to just more than 50% from 62.5%. Importantly, General Electric will have to take prior permission from the underwriting banks if the company decides to divest its remaining stake in Baker Hughes in the coming 180 days. The developments show that General Electric is determined to separate from Baker Hughes earlier than expected.

Many analysts agree that the attained fund from early separation will help General Electric lower its piled-up debt load — reported at $112.3 billion as of Sep 30. In fact, General Electric added that the plan for early exit will not only benefit its shareholders but Baker Hughes’ also. Although there might be an early separation of the companies, Baker Hughes will continue to have access to the digital technology of the industrial conglomerate.

Currently, Baker Hughes carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are Hess Corporation (NYSE:HES) and Enterprise Products Partners L.P. (NYSE:EPD) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hess beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 230.5%.

Enterprise Products surpassed the Zacks Consensus Estimate in the prior four quarters, the average positive earnings surprise being 9.3%.

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