• GE will own 62.5 percent of the new publicly traded company, Baker Hughes shareholders will own 37.5 percent
• The new publicly traded company will have a combined revenue of $32 billion
TEXAS, U.S. – In its biggest ever deal in the oil and gas industry – General Electric Co. announced that it is merging its oil and gas business with oil-field services provider, Baker Hughes Inc.
GE is set to pay a total of $7.4 billion in cash and will own 62.5 percent of the new company, while Baker Hughes shareholders will own 37.5 percent.
The new publicly traded company is set to have a combined annual revenue of $32 billion.
As of Friday, the third largest oil-field services provider, Baker Hughes had a market value of about $26 billion.
As part of this deal, Baker Hughes shareholders are set to receive a special one-time cash dividend from GE of $17.50 a share after the deal closes.
The combined company will create the second-largest company in the oil-field services industry in terms of revenue.
Reports noted that after the merger, the companies will supply drilling equipment and services to some of the world’s largest oil and gas companies.
Further, services that Baker Hughes possesses which helps oil and gas producers analyse oilfields and manage their subsea and hydraulic fracturing projects will be an added advantage for the new company.
The deal comes at a time when global oil prices have shot up for the third time this year, trading near $50 a barrel.
GE CEO Jeff Immelt said in a statement, “This transaction creates an industry leader, one that is ideally positioned to grow in any market. 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.”
Lorenzo Simonelli, the CEO and president of GE Oil & Gas has been named as the CEO of the new company.
While Baker Hughes CEO, Martin Craighead will be the vice chairman of the new company – Immelt will be the chairman.
In the statement, the companies said that the deal was expected to add $0.04 to GE’s earnings per share by 2018 and $0.08 by 2020.
On Monday, Baker Hughes shares were up 12 percent at $66.20 in premarket trading. Meanwhile, GE’s shares rose 0.3 percent at $29.32 in light trading.