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GE merges oilfield unit with Baker Hughes

Monday, October 31, 2016 - 22:34

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General Electric announced Monday the merger of its oilfield unit with Baker Hughes, betting the combined company will be better positioned for the industry's rebound after the crude price crash.

[NEW YORK] General Electric announced Monday the merger of its oilfield unit with Baker Hughes, betting the combined company will be better positioned for the industry's rebound after the crude price crash.

GE will inject its huge oil and gas operations into Baker Hughes and take a 62.5 per cent ownership of the combined company, which will retain the Baker Hughes brand name.

Baker shareholders will hold the rest of the company, and will also receive a special US$17.50 per share dividend, a payout by GE to consummate the deal totaling US$7.4 billion.

The two companies have about US$32 billion in revenues and operations in 120 countries. Directors of both have approved the deal, which now needs approval by shareholders.

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Baker Hughes brings to the deal a century of experience in support for oil and gas drillers, but has been hard hit by the pullback in exploration activity since the oil price crash in 2014.

GE services include advanced digital technologies and especially support for the liquefied natural gas industry around the world.

"As we go forward, this transaction accelerates our capability to extend the digital framework to the oil and gas industry," said GE chairman and chief executive Jeff Immelt.

The merger is expected to create a stronger services company for the oil and gas exploration and production sector in the face of tough competition with market leader Schlumberger and the number two player Halliburton, whose effort to take over Baker Hughes was blocked by opposition from US antitrust regulators earlier this year.

GE has expanded aggressively into the industry under Immelt, only to be hit by the slump when crude prices lost around 75 per cent in 2014-2015.

Mr Immelt said that the industry's recovery will remain slow over the next couple years.

"We can weather the cycle in the short term and will be very well positioned to lead the industry" when the pickup does come, he said.

Baker Hughes shares jumped 5.5 per cent to US$62.39 while GE shares rose 1.7 per cent to US$29.71 in pre-market trade.

AFP

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