GE, Baker Hughes create new power player in energy sector

general electric logo GE ELP

NEW YORK (AP) — General Electric and Baker Hughes are joining their oil and gas businesses to create a powerful player in an energy sector buffeted by years of weak prices.

The deal could give the new company, which will be called the "New" Baker Hughes, more leverage both in technology and with oil drillers that are cutting back on contracts with oilfield service companies like Baker Hughes.

Baker Hughes is the smallest of the big three oilfield services companies. It has a market capitalization less than a third of rival Schlumberger Ltd.

Combined with GE, however, its annual estimated revenue will more than double to $32 billion, a lot closer to Schlumberger, which has annual revenue of $35.5 billion.

Announcing the deal Monday, GE Chairman and CEO Jeff Immelt touted technological advantages as well, saying that the combined company "accelerates our capability to extend the digital framework to the oil and gas industry."

General Electric Co. will own 62.5 percent of the new company and Baker Hughes Inc., will own the rest. Baker Hughes shareholders will receive a one-time cash dividend of $17.50 per share.

The new company will have operations in more than 120 countries. The transaction is expected to add 4 cents per share to GE's earnings by 2018 and 8 cents per share by 2020.

Immelt will serve as chairman of the new business. Lorenzo Simonelli, president and CEO of GE Oil & Gas, will be CEO.

Baker Hughes Chairman and CEO Martin Craighead will become vice chairman.

The boards of both companies have approved the deal, which is expected to close in the middle of next year. It still requires a nod from Baker Hughes shareholders, as well as regulators.

The new business will have dual headquarters in Houston and London.

Shares of Baker Hughes Inc. rose more than 10 percent before the opening bell, while GE's stock is up slightly.

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now

Whitepapers

Shell Leverages Data to Transform from Reactive to Predictive Operations

This 6-page report describes how Shell engaged in a massive project with OSIsoft to transform the...

Selection, Use, Care and Maintenance of FR Clothing

For industries operating in an inherently dangerous environment, the importance of selecting the ...

Evolution or Revolution: IT / OT convergence means a world of possibilities

The oil and gas industry is experiencing a rapid paradigm shift in regards to digital transformat...

Predict, Prescribe, Profit: Creating a World that Doesn't Break Down

What are you doing to reduce unplanned downtime at your plant? Equipment breakdowns and process i...

Latest PennEnergy Jobs

PennEnergy Oil & Gas Jobs