Merger Madness Continues with GE, Baker Hughes Oil Deal

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On Monday, manufacturing giant General Electric GE announced that it will be combining its oil and gas business with Baker Hughes BHI , an oilfield services provider, in a move that both companies hope will combat the continued slump in oil prices .

The deal will create a newly publicly traded company, but will structure it as a partnership jointly owned by both GE's and Baker Hughes' shareholders. The Wall Street Journal was the first to report that the companies were in talks to merge.

GE will own 62.5% of the new company, while Baker Hughes will have 37.5% stake. After the deal closes, Baker Hughes stockholders will receive a special, one-time cash dividend from GE of $17.50 per share, or about $7.4 billion.

In terms of revenue, the merger of GE Oil & Gas and Baker Hughes will create the second-biggest oilfield services player in the industry after Schlumberger SLB . In 2015, the two businesses had $32 billion in revenue, with operations in more than 120 countries.

"This transaction creates an industry leader, one that is ideally positioned to grow in any market," Jeffrey R. Immelt, the G.E. chairman and chief executive, said in a news release . "Oil and gas customers demand more productive solutions. This can only be achieved through technical innovation and service execution, the hallmarks of GE and Baker Hughes."

The merger between GE and Baker Hughes comes as North American oil and gas producers are gearing back up after an oversupply in the industry zapped prices. While global oil prices have risen to trade at around $50 a barrel this year-thanks to expectations that OPEC could freeze or cut production-it is still well below the highs seen back in 2014, where oil was going for over $100 a barrel.

Back in May, Baker Hughes was in the midst of a different merger, though with Halliburton Co. HAL , another oil and gas industry giant, in a deal that would have been worth $35 billion. After a long regulatory review, as well as a lawsuit by the Justice Department on antitrust concerns, the transaction was called off.

The combined GE-Baker Hughes company will have headquarters in London and Houston, Texas. Mr. Immelt will serve as chairman and Lorenzo Simonelli, who is currently the president and chief executive of GE Oil & Gas, will serve as president and chief executive of the new company.

Like any major merger, the deal is subject to regulatory approval and Baker Hughes' shareholders. It is expected to close by mid-2017.Centerview Partners, Morgan Stanley, and the law firm Shearman & Sterling advised G.E.; Goldman Sachs and the law firm Davis Polk advised Baker Hughes.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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