GE, Baker Hughes merge energy businesses

HOUSTON, October 31, 2016 – GE and Baker Hughes reached a deal to merge GE’s oil and gas arm with Baker Hughes into a new “fullstream digital industrial services company” controlled by GE, a joint press release said on Monday.

GE will own 62.5% of the new company with a revenue of USD 32 billion while Baker Hughes shareholders will receive 37.5% of its shares alongside a one-time dividend of USD 17.50 per share. The merger, which is projected to create the second-largest firm in the oil and gas equipment and services industry, is expected to be completed by mid-2017, the press release added.

The deal comes months after a planned merger between Baker Hughes, until now the third-largest player in the field, and competitor Halliburton, which may now slide from its second position, fell through.

Executives from both firms said in the statement that the merger will bring together GE’s manufacturing expertise and digital data solutions for oilfield operations with Baker Hughes’ more conventional skills in the services sector.

“We look forward to combining the digital solutions and technology from the GE Store with the domain expertise of Baker Hughes and its culture of innovation in the oilfield services sector,” said Lorenzo Simonelli, CEO of GE Oil & Gas.

“The combination of our complementary assets will create a platform capable of seamless integration while we enhance our ability to deliver optimised and integrated solutions and increase touch points with our customers,” added Baker Hughes’ CEO Martin Craighead.

The two companies expect the merger to create total run-rate synergies of USD 1.6 billion and to be accretive to GE’s earnings per share by USD 0.08 by 2020.

Baker Hughes shares went up by some 5.7% and GE’s increased 0.9% in premarket trading Monday, Reuters reported.