Baker Hughes Incorporated BHI 0.26% shares were surging higher early Monday following an official announcement of a deal with General Electric Company GE 0.38%. While the merger/spinoff deal is certainly good news for Baker Hughes shareholders, the terms of the deal are far from the typical buyout. GE will be combining its oil & gas segment with Baker Hughes and then spinning off the combined assets into a brand new oil services juggernaut. Here’s a look at exactly what Baker Hughes shareholders are getting.
First, Baker Hughes shareholders will receive $17.50 per share in cash. In addition, they will get a 37.5 percent stake in the newly-formed company. In the press release out Monday morning, GE said it expects the combined company will generate $32 billion in combined revenue per year.
In 2015, Baker Hughes generated just shy of $16 billion in revenue.
In other words, Baker Hughes shareholders will get $17.50 per share of cash plus a 37.5 percent stake in a new company that is about twice the size of Baker Hughes today.
Using Friday’s closing price as a guide, a 37.5 percent stake in a company with a market cap twice the size of Baker Hughes suggests around $44 in equity per current Baker Hughes share. If you tack on the $17.50 in cash, that makes the deal worth right around $61.50/share. Baker Hughes shares opened Monday’s trading session at almost exactly the $61.50 level.
Of course, these numbers don’t include any synergy benefits, which could be significant.
There is also a certain amount of risk the deal will get blocked by regulators.
Halliburton Company HAL 0.67%’s proposed buyout of Baker Hughes was eventually dropped…
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