Ananym suggests Baker Hughes sell its oil service equipment business

Ananym Capital wants to see Baker Hughes' oil field equipment and services business spun off. They believe this could boost the stock price at least by 60%.

Charlie Penner, co-founder of Ananym and active passive-investment summit host 13D Monitor in New York on Tuesday, said: "That is our preferred path. We also have complete confidence in Baker Hughes management and board to select the best path for their shareholders.

The company was formed in 2017 by a merger between Baker Hughes and GE Oil and Gas. It has two business units.

Penner, a Penner analyst, said that at current market valuations the company's earnings should be valued at 13X in 2026 before taxes, interest and amortization. However, it is currently trading at only 9X EBITDA.

The Industrial and Energy Technologies division produces turbines, motors and compressions for low-carbon energy resources like electricity generated from renewables, hydrogen and geothermal.

Oil field equipment and services is the business that makes and provides equipment for oil and gas exploration. It also includes the Baker Hughes legacy business.

Baker Hughes stock is up and outperforming rivals Halliburton, Schlumberger (now SLB), and others. Penner noted that the majority of Baker Hughes's earnings are contributed by its technologies unit. Management and the board acknowledge the "sum of parts valuation discount" imposed by investors.

Baker Hughes stated that it valued the opinions of all shareholders and "will continue to interact with Ananym Capital in order to better understand and share theirs." A spokeswoman stated that "we remain focused on executing the strategy to drive growth" and to deliver additional value to our shareholders.

Baker Hughes announced earlier this month that it would conduct a comprehensive evaluation of its capital allocation, operations, cost structure, and business to continue delivering value to shareholders.

Penner and Alex Silver, who founded Ananym in the last year, have had constructive discussions with Baker Hughes management. Penner won the board election at Exxon Mobil for 2021.

The technologies segment can be valued properly and the capital allocation strategy of each business optimized. This includes a greater focus on investment and management for technologies.

Penner stated that the oil field business is a "strong" player because its earnings are more geared towards production revenues for existing wells than building new ones, and has a greater international exposure.

JPMorgan analysts praised the actions of the company, noting that in an earlier note in October it had "been by a large margin one of the most successful stocks in OFS" (oilfield services). The JPM analysts referred to the pledge made on October 6 to evaluate the company's business and wrote: "Today’s release suggests that it is not planning to rest upon its laurels." The DNA of the company has always been this under CEO Lorenzo Simonelli."

Ananym had asked healthcare products distributor Henry Schein, to develop a succession plan for its CEO and reduce costs. Stanley Bergman resigns after Ananym threatened to fight the board. The company also suggests that auto parts supplier LKQ should sell its European operations.

(source: Reuters)