Baker Hughes nears $13.6 billion deal to buy Chart, edging out Flowserve, FT reports

Baker Hughes is reportedly nearing a $13.6 billion cash deal to acquire Chart Industries, valuing Chart's equity at a 22% premium and triggering a 17%+ after-market stock surge for Chart. This potential acquisition, which outbid Flowserve and terminated Chart's prior all-stock merger agreement, supports Baker Hughes' strategic expansion in natural gas and LNG as it adapts to the energy transition. The move reflects ongoing consolidation within the U.S. energy sector.

Analysis

Baker Hughes (BKR) is reportedly nearing a $13.6 billion all-cash acquisition of Chart Industries (GTLS), a strategic move that displaces a prior all-stock merger agreement between Chart and Flowserve (FLS). The proposed deal values Chart's equity at $210 per share, a 22% premium to its last closing price, which triggered a more than 17% surge in Chart's after-market trading to $202 per share. This market reaction signals strong investor confidence in the deal's completion and its perceived value. For Baker Hughes, the acquisition directly supports CEO Lorenzo Simonelli's strategy of repositioning the company for the energy transition by significantly expanding its footprint in the natural gas and LNG sectors. Acquiring Chart, a manufacturer of critical equipment for gas and liquid molecule handling, provides Baker Hughes with key technology and market access in a high-growth area. The move underscores the competitive M&A environment for assets central to the energy transition, even as the broader energy deal-making wave of 2023 has slowed.

Key Decisions for Investors

• Chart Industries (GTLS) investors should view the $210 per share all-cash offer as a significant value crystallization event, providing a certain premium and removing the market risks associated with the now-terminated all-stock Flowserve merger.
• For Baker Hughes (BKR) investors, this acquisition represents a clear strategic acceleration into the LNG and natural gas value chain, but they should monitor the balance sheet impact of a large cash outlay and the execution risks of integrating a new, sizable business.
• The competitive outcome negatively impacts Flowserve (FLS), whose strategic path is now less certain, and investors should watch for management's response to this terminated merger and their plans for future growth.