Why Chart Industries walked away from Flowserve: A closer look at the last-minute pivot

Chart Industries, Inc. (NYSE: GTLS) made headlines recently, not just for its $13.6 billion buyout deal with Baker Hughes Company (NASDAQ: BKR), but also for abruptly terminating a previously announced merger agreement with Flowserve Corporation (NYSE: FLS) on the same day. The decision to walk away from the Flowserve deal—and the speed at which the pivot occurred—has raised questions across industrial and energy circles.

The reversal came after Chart’s board determined that Baker Hughes’ offer represented what is legally termed a “Superior Proposal,” a move that triggered a clause in its merger agreement with Flowserve and allowed Chart to exit without breaching contractual obligations.

What does the “Superior Proposal” clause mean in corporate M&A law?

In most M&A contracts, companies include a fiduciary-out provision that allows the seller’s board to reconsider if a materially better offer is received. This clause is often activated when a proposal delivers greater immediate value to shareholders and is likely to receive regulatory and shareholder approval.

In Chart Industries’ case, the Baker Hughes proposal—an all-cash offer of $210 per share, representing a $13.6 billion enterprise value—clearly exceeded the Flowserve arrangement in both deal size and cash component. Chart’s board, with advice from Wells Fargo and Winston & Strawn LLP, concluded that the Baker Hughes offer met the legal definition of superior under the terms of its contract with Flowserve.

The board’s decision also aligned with Delaware case law precedent, which gives boards discretion to act in shareholders’ best financial interests when a better deal emerges before a transaction is finalized.

How sudden was the switch from Flowserve to Baker Hughes?

Chart’s agreement with Flowserve had been announced only weeks earlier, and planning for integration had already begun. However, behind the scenes, Baker Hughes had reportedly been monitoring Chart’s strategic value and made its formal approach after Flowserve’s announcement.

On July 29, 2025, Chart Industries filed two separate disclosures: one announcing the termination of the Flowserve merger, and another announcing the Baker Hughes acquisition. The filings confirmed that Flowserve was informed in advance and that legal procedures under the original merger terms were followed, including the required notice period and negotiation window.

According to institutional sources, the transition was executed quickly but within the bounds of contract law, aided by a well-prepared Baker Hughes team that moved swiftly to secure financing and board approvals.

What might Flowserve do next—and what does this mean for its M&A strategy?

Flowserve has not yet made a public statement about Chart’s decision to exit the merger agreement. However, M&A analysts believe Flowserve is likely to regroup and assess other inorganic growth options, especially given that the pursuit of Chart was part of a broader strategy to diversify its flow control and process technology offerings.

Some investors speculated that Flowserve could challenge the definition of “Superior Proposal” or seek compensatory remedies, but given that termination provisions were followed and no breach occurred, such actions appear unlikely.

Instead, the more probable route is strategic recalibration. Flowserve may explore smaller bolt-on acquisitions or even revisit alternative targets within the industrial gas, hydrogen, or LNG infrastructure segments.

The loss of Chart is a setback, particularly in light of the energy transition, where Flowserve had hoped to quickly build capabilities. The company now faces pressure from investors to clarify its next steps and preserve deal momentum.

What does this reveal about M&A competition in industrial technology?

The speed at which Baker Hughes was able to override Flowserve’s agreement with Chart highlights the intensifying competition in clean energy and industrial tech M&A. With sectors like hydrogen, LNG, and carbon capture becoming increasingly attractive, larger players are moving aggressively to lock in capabilities and market share.

For Chart Industries, the pivot reflects confidence in Baker Hughes’ global scale, installed base, and alignment with its own engineering-first culture. For Baker Hughes, the deal secures a critical platform in energy transition infrastructure. And for Flowserve, it’s a reminder that strategic execution in today’s M&A climate must be swift, decisive, and legally airtight.