Baker Hughes a GE company and General Electric Co. said Nov. 13 they will create a joint venture, and through a series of agreements, will continue to collaborate beyond the official separation of the companies.
Through the joint-venture agreement, Baker Hughes and General Electric will continue collaborating on critical rotating equipment and heavy-duty gas turbine technology used primarily in Baker Hughes' LNG, on- and offshore production, pipeline and industrial segments within its turbomachinery and process solutions segment, and by GE in its power generation business.
Baker Hughes and General Electric will contribute certain assets and inventory into the joint venture and both companies will jointly control operations. The joint venture will have a supply and strategic collaboration agreement with GE Aviation with revised and extended pricing arrangements.
The companies also entered long-term supply and distribution agreements for heavy-duty gas turbine technology at the current pricing levels. The agreements will go into effect on the later of July 3, 2019 or the "trigger date", the date on which General Electric and its direct subsidiaries no longer own more than 50% of the outstanding voting power of Baker Hughes' outstanding common stock.
As part of the agreements, Baker Hughes and GE Digital have agreed to extend their exclusive supplier relationship for digital oil and gas applications.
Specifically, for four years beginning on the "trigger date," the companies will maintain current operations and pricing levels with regard to the Controls product line Baker Hughes offers within its digital solutions segment. General Electric will transfer certain U.K. pension liabilities to Baker Hughes on what is intended to be a fully funded basis.
Additionally, the current tax matters agreement negotiated at the time of the merger in July 2017 will remain largely in place and both companies will retain the ability to monetize certain tax benefits. The inter-company services fee that Baker Hughes agreed to pay to General Electric as part of the merger will be reduced over time beginning on Jan. 1, 2019.
General Electric will maintain the right to nominate five directors to Baker Hughes' nine-person board until the "trigger date," and will have a right to nominate one director to the Baker Hughes board following the "trigger date."
The Baker Hughes conflicts committee, a subcommittee of its board of directors consisting solely of non-General Electric designated independent directors, approved the agreements following the negotiations with General Electric. General Electric's board of directors also approved the agreements.
Baker Hughes and General Electric announced their intent to combine in October 2016 and completed the merger in July 2017, creating Baker Hughes, a GE company.
In June, General Electric announced its plan to
