Baker Hughes merge with GE’s oil and gas business, creating a public company with market capitalization of over 32 billion USD. GE will also participate in merger through special one-time cash dividend in the amount of 17.50 USD for each share of Baker Hughes. The new company will be traded on New York Stock Exchange and will be 62.5% owned by GE and 37.5% by shareholders of Baker Hughes. The new merger is expected to reduce the costs and to make the company more competitive on provision of equipment and services for offshore oil platforms and wells. Also the shareholders will benefit from synergies and cost reductions, improving the liquidity of the business against the expected recovery of the oil industry.
The merger will bring together Baker Hughes’ oilfield services experience and technology with GE’s oil and gas technology, manufacturing pedigree and digital platform.
Lorenzo Simonelli, CEO of GE Oil & Gas, will head the new company, while CEO and Chairman GE Jeffrey Immelt will be the chairman of Board of Directors. President and CEO of Baker Hughes, Martin Craighead, will be Vice-President of the new formed company. The board of the new company will consist of five directors elected by GE, and four nominated by Baker Hughes.
After two difficult years for the GE’s oil and gas business also other competitors in the industry began to see signs of hope. Crude oil prices, which fell to 30 USD per barrel this year, recently recovered to about 50 USD per barrel. The price improvement is expected after the meeting of OPEC and possible limit of oil production, which probably will reduce the overcapacity on the market and boost the prices up again.
GE also presented signs of improvement in the energy sector during Q3 2016, as the number of US rigs and wells remains 50% less than the previous year, but still higher compared to the previous three months. However, the service contracts fell across the while petroleum business of GE.