Baker Hughes has entered an agreement to acquire Chart Industries for $13.6bn in cash.
Its technologies are used throughout the liquid gas supply chain and span markets including Liquified Natural Gas (LNG), data centers and New Energy.
Last year Chart generated $4.2bn in revenue and $1.0 billion in underlying cash profit (EBITDA).
The transaction will be debt financed. At close, the enlarged group’s debt is expected to be around 2.25x underlying cash profit, and to reduce to 1.0-1.5x within the following 24 months.
The deal, scheduled to close in mid-2026, is subject to regulatory approval and acceptance by Chart’s shareholders.
Baker Hughes share price fell 1.7% on the day of the announcement.
Our view
Baker Hughes’ audacious $13.6bn move to fend off rival bidders for Chart Industries has been met with some caution by investors. It’s not quite a done deal yet. And using Baker Hughes’ own valuation as a yardstick, the price looks to be on the full side.
At first glance, the deal makes sound strategic sense. It’s a complementary fit that expands the group’s capabilities in areas of the energy market with attractive growth credentials. Management is confident that shareholders will see a good return on their investment, but as with all acquisitions, there’s an element of execution risk.
One side of the business that is struggling to grow is Oilfield Services & Equipment. But the breadth of Baker Hughes technology offering across the energy landscape leaves it better positioned than many in the sector to prosper in a rapidly evolving energy market.
Sales, profits and order metrics in the all-important Industrial & Energy Technology (IET) division continue to hold up well, with the division’s order book reaching a record high. So we’re pleased to see acquisition activity focus on this side of the business.
Momentum in IET is supported by a healthy demand for liquefied natural gas (LNG) where capacity is set to increase by about 60% by the end of the decade, due to its place as a key transition fuel and role in improving energy security.
Order intake for gas technology took a notable step downwards in the second quarter, but the long-term growth drivers remain in good shape. Baker Hughes is a frontrunner to pick up new projects in this space. Meanwhile, recent weakness seen in gas technology orders has been offset by improved intake in future-facing products such as New Energy and power generators for data centres.
There’s no assurance that an economic slowdown won't weigh on development activity amongst IET customers. But the group's order book has grown to $34bn. That revenue visibility, as well as continuing improvements in efficiency, can help deal with short-term lulls in commercial activity.
The group boasts a robust balance sheet and impressive cash flows. That helps support share buybacks and a prospective dividend yield of 2.1%. But future shareholder returns can’t be guaranteed, and may be reigned back in light of the acquisition of Chart Industries.
Baker Hughes’ attractive business mix is reflected by a valuation towards the top of the peer group. It’s well deserved in our opinion, but means the shares are likely to be sensitive to any sustained weakness in order intake and changes in the macroeconomic outlook.
Environmental, social and governance (ESG) risk
The ESG risk to oil and gas service providers runs parallel to those impacting producers. Environmental concerns are the primary driver of ESG risk for this group, with carbon emissions and waste disposal being the main issues. Health and safety, community relations and ethical governance are also contributors to ESG risk.
According to Sustainalytics, Baker Hughes's management of material ESG issues is strong, as are its ESG reporting practices. Based on available evidence, a part of executive remuneration is explicitly linked to sustainability performance targets. Similarly, the environmental policy is very strong. The company also has a strong whistleblower programme in place. It does not appear to be implicated in any significant controversies. It has a stated goal of reducing scope 1 and 2 emissions by 50% by 2030, and an overall reduction in scope 3 by 2033, although emissions from the products it sells, which account for almost all of its emissions have been moving in the wrong direction.
Baker Hughes key facts
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