Baker Hughes Incorporated BHI 0.26% shares are down about 6 percent following an announcement that General Electric Company GE 0.38% and Baker Hughes will be merging their oil & gas assets into a brand new company.
The complex merger/spinoff proposal is far from a typical buyout. Baker Hughes shareholders get $17.50/share in a cash dividend and will control 37.5 percent of a newly-formed company. GE will control the majority 62.5 percent.
It seems as though the market believes GE got the better end of the deal. While Baker Hughes shares are selling off on Monday, GE shares are about even.
However, it’s important to keep in mind that both GE shares and Baker Hughes shares are up 1.5 percent and 7.9 percent, respectively, in the past five trading sessions.
Similar Combo
The potential merger/spinoff combo is similar in structure to the type of deal Hewlett Packard Enterprise Co HPE 0.56% put together with Computer Sciences Corporation CSC 0.14%earlier this year. In that deal, HP Enterprise spun-off its technology services operations to combine with Computer Sciences Corporation and form a new $26 billion service giant. HPE received a 50 percent stake in the new company and a cash dividend of $1.5 billion. In addition, HPE dumped $2.5 billion in liabilities on the newly-formed company.
Baker Hughes and GE investors are likely more interested in how Computer Sciences and HPE shares reacted to the news. In the one month following the deal’s announcement, HPE (potentially played by GE) shares surged…
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