Shares of General Electric Co. jumped after it announced a deal to start cutting its stake in oil services firm Baker Hughes a GE company, a move that would raise nearly $4 billion for the struggling industrial conglomerate.
Under the new agreements unveiled by both companies, GE will sell up to 101.2 million shares in Baker Hughes through a secondary offering, and the oil services firm will repurchase 65 million shares from GE and its affiliates. The deal would be worth about $3.9 billion based on Baker Hughes' closing price of $23.64 on Nov. 12.
The transactions are expected to keep GE's stake in Baker Hughes above 50%, the companies said. The conglomerate's remaining stake will be subject to a 180-day lock-up period.
"Earlier this year we announced our intent to pursue an orderly separation from [Baker Hughes]," GE Chief Executive Lawrence Culp Jr. said. "The agreements announced today accelerate that plan in a manner that mutually benefits both companies and their shareholders."
In June, GE said it plans to fully separate its 62.5% interest in Baker Hughes over the next two to three years as it focuses on its power, aviation and renewable energy businesses under a new strategy.
Baker Hughes said it would spend up to $1.5 billion on the repurchase of shares from GE.
The new deal with Baker Hughes marks GE's first major portfolio change under Culp, who said on Nov. 12 that there is "very much a sense of urgency" to reduce the company's leverage through asset sales.
Analysts at S&P Global Ratings said in a note that the Baker Hughes stake sale is "further evidence of actions by GE to bolster its cash position to provide some flexibility to continue to address the poor performance in power and other contingencies, as well as its deleveraging plan."
GE's stock was up 13.08% as of 1:04 p.m. ET, trading at $9.035 per share. Baker Hughes shares were up 2.33% to $24.19.
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