Ananym Capital's Push to Spin Off Baker Hughes' OFSE Business: Unlocking a 51%+ Valuation Gap via Strategic Separation and Sum-of-the-Parts Re-Rating

The energy and industrial sectors have long grappled with the challenge of valuing conglomerates whose diverse business lines pull in opposite directions. For Baker Hughes (BHGE), this tension is epitomized by its Oilfield Services & Equipment (OFSE) segment-a cyclical, commodity-sensitive unit-and its Industrial & Energy Technology (IET) segment, which is positioned at the forefront of secular growth trends like LNG and the energy transition. has seized on this structural imbalance, advocating for a spin-off of the OFSE business to unlock what it claims is a 51%+ valuation gap through a sum-of-the-parts re-rating.

The Valuation Discrepancy: A Tale of Two Segments

Baker Hughes' current valuation reflects a blended multiple that fails to differentiate between its two core segments. The OFSE business, which accounts for 45% of the company's projected 2025 revenue and 40% of EBITDA, according to analysis. In contrast, the IET segment, which drives growth in LNG and power generation, is arguably undervalued despite its superior margins and long-term demand drivers. Ananym argues , the range typical for high-growth industrial peers. This divergence creates a compelling case for strategic separation.

Strategic Rationale: Separating Cycles from Trends

The OFSE segment's sensitivity to oil price cycles and upstream capital expenditures contrasts sharply with the IET segment's alignment with secular tailwinds. As Ananym highlights, the IET business is uniquely positioned to benefit from the global energy transition and the surge in LNG infrastructure demand. By spinning off OFSE, Baker Hughes could free the IET segment from the drag of cyclical volatility, enabling it to be valued on its own merits. This approach mirrors the successful spin-off, where General Electric's energy technology assets were re-rated as a standalone entity, gaining clarity and investor focus.

Historical Precedents and Valuation Logic

The concept of a sum-of-the-parts re-rating is well-documented in industrial and energy sector spin-offs. For instance, FTAI Aviation's strategic repositioning-from a capital-intensive leasing model to a higher-margin aerospace products business-demonstrated how structural changes can justify a 50%+ valuation uplift. Similarly, Ananym's thesis for Baker Hughes hinges on the idea that separating OFSE and IET would attract distinct investor bases: growth-oriented capital for IET and free-cash-flow-focused investors for OFSE. This diversification of ownership could amplify liquidity and pricing efficiency for both entities.

Quantifying the Upside: A 51%+ Gap

Ananym's projection of a 51%+ valuation gap is rooted in a straightforward calculation. , according to analysts. Analysts have historically observed similar re-ratings in spin-off scenarios, where the sum of the parts consistently outperforms the whole due to improved clarity and targeted investor appeal.

Conclusion: A Strategic Imperative for Shareholder Value

Ananym Capital's push to spin off Baker Hughes' OFSE business is not merely a speculative play-it is a data-driven strategy to correct a valuation misalignment that has persisted for years. By leveraging the energy transition's tailwinds and the industrial sector's appetite for clarity, the proposed separation could unlock substantial shareholder value. As the market increasingly rewards companies that align with long-term trends, Baker Hughes faces a pivotal decision: cling to a blended valuation or embrace a strategic re-rating that reflects the true potential of its two distinct businesses.