According to CNBC, newly formed activist investment firm Ananym Capital Management has taken a position in Baker Hughes and is pushing the company to spin off its oilfield services and equipment business. The firm, which launched on September 3, 2024, and manages $260 million across 10 positions, is run by former JANA Partners partner Charlie Penner and former P2 Capital Partners member Alex Silver. Ananym argues that separating the OFSE unit could push Baker Hughes’ stock price up by at least 60%. The company currently trades at about 9x EBITDA, closer to oilfield services peers (6-7x) than industrial technology peers (16-18x), despite its faster-growing industrial segment representing 55% of projected 2025 revenue. Baker Hughes recently announced a review of its capital allocation and business structure, suggesting potential alignment with Ananym’s position.
The compelling case for a split
Here’s the thing about Baker Hughes – it’s essentially two completely different businesses awkwardly sharing one stock ticker. You’ve got the industrial and energy technologies (IET) unit that’s basically a high-tech industrial powerhouse. This is the part that’s riding the LNG boom with 95% global market share in turbomachinery for plant construction, plus it’s suddenly become a data center darling with orders exploding from $0 to $550 million in just two quarters. Then you’ve got the oilfield services (OFSE) business that’s still very much tied to commodity cycles, despite management’s impressive efforts to reduce that exposure.
The valuation disconnect is pretty staggering when you think about it. Baker Hughes trades at roughly 9x EBITDA, which is much closer to the 6-7x multiples that pure-play oilfield services companies command. But wait – shouldn’t a company that’s majority industrial technology business trade closer to, say, 16-18x like its industrial peers? That’s the entire argument in a nutshell. Ananym’s sum-of-the-parts analysis suggests Baker should be trading around 13x, which would mean about 51% upside even after accounting for separation costs.
Why the industrial side is the real prize
What’s really fascinating here is how Baker Hughes has positioned itself at the intersection of several massive industrial trends. The LNG market is expected to grow at 10% annually through 2030, and Baker basically owns the turbomachinery space for plant construction. Then there’s the data center power demand explosion – Baker is one of the few companies supplying complete behind-the-meter power solutions, and they’re developing larger systems for mega-data centers. When you combine that with their pending Chart Industries acquisition and the shift toward high-margin aftermarket services (35%+ margins with 10+ year contracts), you’ve got a business that deserves a premium multiple.
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A new breed of activist
Ananym represents an interesting evolution in activist investing. They’re not coming in guns blazing demanding board seats and public fights – at least not yet. They’ve expressed confidence in Baker Hughes management and seem content to work collaboratively behind the scenes. But don’t mistake their cooperative tone for weakness. These are the same people who helped engineer some of the most successful activist campaigns in recent memory.
The timing is pretty interesting too. Baker Hughes just announced a comprehensive business review in early October, so Ananym might be pushing on an already-open door. Management has proven they can execute – the stock is up 232% over five years, which is hardly the profile of a company in crisis. But sometimes even great companies have structural issues holding them back, and that appears to be what Ananym sees here.
What this means for energy investors
If Baker Hughes does pursue a separation, it could create a fascinating dynamic in both the industrial technology and energy services spaces. You’d essentially get a pure-play industrial tech company with massive exposure to LNG and data center growth trading at a premium multiple, alongside a streamlined oilfield services business that might actually benefit from being evaluated on its own merits rather than dragging down the valuation of its faster-growing sibling.
The bigger question is whether this becomes a trend. How many other companies are out there with hidden industrial technology gems buried within more traditional energy businesses? And in an era where investors are increasingly focused on thematic investing around energy transition and digital infrastructure, does it still make sense to keep these disparate businesses together? Baker Hughes might just become the test case that answers these questions for the entire sector.
