Baker Hughes, GE Enter Into Series Of Long-term Agreements - Quick Facts

(RTTNews) - Baker Hughes, a GE company (BHGE) and General Electric Co. (GE) jointly said Tuesday that they have entered into a series of long-term agreements that amend the commercial and technological relationships between the two companies.

The agreements focus on long-term collaboration on critical rotating equipment, including aeroderivative and heavy-duty gas turbine technology, BHGE access to GE Digital software and technology, and a series of agreements relating to operations and pricing within BHGE Digital Solutions' Controls product line, pensions, tax matters and intercompany services costs.

The BHGE Conflicts Committee, a subcommittee of the BHGE Board of Directors consisting solely of non-GE designated independent directors, approved the agreements following the negotiations with GE. GE's Board of Directors also has approved the agreements.

GE Chairman and CEO Lawrence Culp, Jr., said, "Earlier this year we announced our intent to pursue an orderly separation from BHGE. The agreements announced today accelerate that plan in a manner that mutually benefits both companies and their shareholders."

BHGE and GE said they agreed to cooperate on a proposed sale by GE of part of its stake into the market and to a concurrent repurchase of another part of GE's stake by BHGE.

Together, these transactions are expected to maintain GE's stake in BHGE above 50 percent. GE's remaining stake will be subject to a 180-day lock-up prohibiting further sales into the market without consent from the underwriting banks.

Under the terms of the agreements, BHGE and GE have agreed to form a joint venture or JV to provide aeroderivative engine services and product management for use in the oil and gas and industrial spaces. In parallel, BHGE has also entered into long-term supply and distribution agreements with GE for heavy-duty gas turbine technology at the current pricing levels.

As part of the agreements related to GE Digital software and technology, BHGE and GE Digital have agreed to extend their exclusive supplier relationship for digital oil and gas applications.

Among other key agreements, GE will transfer to BHGE certain UK pension liabilities on what is intended to be a fully funded basis. The current Tax Matters Agreement with GE that was negotiated at the time of the merger between Baker Hughes Incorporated and GE Oil & Gas in July 2017 will remain largely in place.

The intercompany services fee that BHGE agreed to pay to GE as part of the merger will be reduced over time beginning on January 1, 2019.

BHGE and GE have also agreed to amend the terms of their stockholders agreement to provide that GE's right to nominate five directors to BHGE's nine-person board will continue until the Trigger Date.

In addition, GE will have a right to nominate one director to the BHGE board following the Trigger Date until GE ceases to own at least 20 percent of the voting power of BHGE's outstanding common stock.