General Electric Co.’s (GE) shares soared in afternoon trade on Tuesday after the company announced plans to sell a portion of its majority stake in Baker Hughes (BHGE), which will earn proceeds of $4 billion at current prices.
GE is looking to sell over 166 million shares in total, of which up to 101 million shares will be sold in a secondary offering and around 65 million shares will be repurchased by Baker Hughes. Baker Hughes plans to spend close to $1.5 billion on this stock repurchase activity. GE will reportedly retain a stake of over 50% after the transaction.
GE has been struggling with heavy debt as well as mounting losses in its power division and has put up several of its divisions for sale over the past couple of months in order to raise cash and to simplify its business structure. The company plans to focus on its aviation, renewable energy and power generation businesses.
In June, GE disclosed plans to divest its 62.5% stake in Baker Hughes over the next three years. As per an agreement formed during the combination of the businesses of both companies, GE was not allowed to sell its stake in Baker Hughes until next July. This transaction is a major move by new CEO Larry Culp who took charge on October 1.
GE’s stock is down over 50% year-to-date. Looking at the past one month, the stock has dropped 30%. After gaining as much as 10% during afternoon hours on Tuesday, GE’s shares slowed down. As of 2:25 pm ET, GE shares were up 7.7% while Baker Hughes was up 0.3%.