Activist Ananym Capital sees upside if Baker Hughes spins off oil services

Baker Hughes Spin-Off Could Unlock Value, Says Ananym Capital—Potential Opportunity for Investors

Imagine your favorite sports team has two star players who are both great, but play very different positions. Now, picture a coach asking if splitting them up could make each shine even brighter. That’s what’s happening right now with Baker Hughes, a big name in the energy world.

Baker Hughes: What Do They Do?

Baker Hughes is a company that helps other businesses get energy, like oil and gas, out of the ground and into our homes and factories. They do this in two main ways:

  • Oilfield Services and Equipment (OFSE): This part helps companies drill, build, and manage oil and gas wells.
  • Industrial and Energy Technology (IET): This part focuses on making big machines, like turbines and compressors, and helps with things like power for data centers and cleaner energy solutions.

Baker Hughes is worth about $48 billion on the stock market. They’ve been around for a while and have grown stronger since merging with GE Oil & Gas in 2017.

Who Is Ananym Capital and What Do They Want?

Ananym Capital is a new investment group run by some well-known experts. They look for good companies that might be worth more than their current stock price shows. Now, they’ve bought shares in Baker Hughes and have a big idea: they want Baker Hughes to split up its two main businesses, especially spinning out the oilfield services part.

Why? Ananym says this could help the stock price jump by as much as 60%. They believe each business could do better on its own, like two star players leading separate teams.

Bull Case: Why Splitting Up Could Be Good

  • Unlocking Value: Right now, Baker Hughes trades more like an oilfield company (with lower stock value) even though its technology side is bigger and could be valued much higher.
  • Strong Growth: The IET part, especially with new deals in data centers and power solutions, is growing fast. For example, orders from data centers went from $0 to $550 million in just six months!
  • LNG Leadership: Baker Hughes has a 95% market share in turbomachinery for liquefied natural gas (LNG) plants, a market growing about 10% every year through 2030 (IEA Report).
  • Better Margins: The technology side is nearing a 20% profit margin, which is higher than many traditional oilfield companies.
  • Recurring Revenue: Long-term contracts mean steady, predictable income, which investors love.
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Bear Case: What Could Go Wrong?

  • Separation Costs: Splitting a big company can be expensive and might cause short-term confusion or lost savings from working together.
  • Commodity Risk: The oilfield services side is still very sensitive to oil and gas prices, which can swing wildly.
  • Uncertain Results: Sometimes, breaking up a company doesn’t create as much value as expected. There’s always a risk that one or both sides might struggle alone.
  • Market Volatility: Energy companies can be affected by global events or sudden changes in policy or demand.

What’s Happening Now?

Baker Hughes’ management has already started looking at how they spend money and run their business. They have a strong track record, with the company’s stock growing 28% in the past year and over 230% in five years. Ananym Capital says they trust management to make the best choice, but if things don’t move forward, they might push harder.

So far, both sides seem to be working together. There’s no big fight—just a discussion about how to make the company even stronger for everyone who owns its stock.

Historical Context: Do Breakups Work?

Splitting up big companies isn’t new. For example, when eBay spun off PayPal in 2015, PayPal’s stock soared—showing that sometimes, separate companies can do better than one big one (CNBC). But it doesn’t always work out, so investors need to watch carefully.

Investor Takeaway

  • Watch for News: Keep an eye on updates about Baker Hughes’ next steps. A split could mean big changes for the stock.
  • Diversify: Remember that energy companies can be risky, so don’t put all your eggs in one basket.
  • Look at Margins: Companies with growing, steady profits (like IET’s 20% margin) can be more attractive long-term.
  • Check Valuations: Baker Hughes is valued lower than similar technology companies. If a split happens, that could change fast.
  • Think Long-Term: Activist investors often look for changes that take time to play out. Be patient and stay informed.

For the full original report, see CNBC

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