The Korea Herald

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GE, Baker Hughes create powerful new player in energy sector

By 박가영

Published : Oct. 31, 2016 - 20:44

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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.

Under the deal announced Monday, 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 $32 billion of combined revenue and 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.

GE Chairman and CEO Jeff 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.