Baker Hughes nears $13.6bn deal to buy Chart Industries over the head of rival suitor
Potential acquisition displaces earlier agreement to merge with competitor Flowserve
Oil and gas equipment supplier Baker Hughes is nearing a $13.6bn all-cash deal to buy Chart Industries, gatecrashing an earlier agreement to merge with rival Flowserve, according to people familiar with the matter.
The acquisition will give Baker Hughes, the $46bn oilfield services group, a stronger foothold serving crucial industries such as liquefied natural gas, nuclear energy and data centres and help to boost its fast-growing industrial and energy technology division.
The deal to buy Chart, which specialises in handling gas and liquids at extremely low temperatures mainly for industrial clients, would displace an agreement the company made earlier this year with rival Flowserve to combine in a $19bn all-stock merger, the people said. That agreement, which was framed as a merger of equals, had now been terminated, they added.
The deal values Chart’s equity at $210 a share, a 22 per cent premium to its market capitalisation, giving it an equity value of about $10bn, the people said. Shares in Chart jumped by 16.5 per cent to $200 in after-hours trading on Monday following the Financial Times report about the deal, after closing at $171.65 on Monday.
Baker Hughes, Chart and Flowserve did not immediately respond to requests for comment. The deal was likely to be announced in the coming days, the people said, warning that the agreement was not final and the plans could change.
Chart had initially agreed to a merge with Flowserve as part of an effort to strengthen its position as a supplier of equipment and services that manage the flow of liquids and gases across several industries.
Baker Hughes’ decision to make a higher bid for Chart forced the company’s board to reconsider its deal with Flowserve, the people said. Shares in Flowserve jumped by 5.2 per cent in after-hours trading.
Best known as a supplier for US oilfields, Baker Hughes expects the deal will aid its pivot towards serving industrial companies.
Analysts project that its industrial and energy technology division will generate about 47 per cent of its nearly $27.1bn total revenues this year, up from 37.1 per cent five years ago, according to Bloomberg.
Baker Hughes has largely focused on bolt-on acquisitions under the leadership of chief executive and chair Lorenzo Simonelli.
On an earnings call earlier this month, Simonelli said the company would “continue to target opportunities that strengthen our industrial footprint and unlock meaningful synergies”. Shares in Baker Hughes are up 21 per cent over the past year.