General Electric Co. agreed to combine its oil and gas business with Baker Hughes Inc. as the companies seek to bolster their operations amid the global slump in crude prices.
GE will own a 62.5 percent stake in the combined entity, which will be publicly traded, the companies said Monday in a statement. GE will contribute $7.4 billion to fund a special dividend of $17.50 a share to Baker Hughes stockholders.
Oilfield contractors are increasingly forming partnerships to help cut costs and broaden their service offerings and distribution channels amid the downturn. The moves have come into favor as customers seek ways to improve efficiency and get greater value out of the services and gear needed to suck crude out of the ground.
The deal comes after GE held talks earlier this year about buying pieces of Baker Hughes set to be divested under a sale of the Houston-based company to Halliburton Co., a transaction that collapsed. By joining forces, Baker Hughes and GE are betting they can compete more effectively with the world’s top oilfield-services provider, Schlumberger Ltd., which recently bought equipment-maker Cameron International.
‘New Baker Hughes’
GE rose 0.9 percent at 6:13 a.m. in New York before regular trading, while Baker Hughes was up 4.7 percent. GE fell 6.2 percent this year through Friday, compared with a 4 percent gain in the Standard & Poor’s 500 Index. Baker Hughes rose 28 percent through Friday.
Lorenzo Simonelli, chief executive officer of GE Oil & Gas, will serve in the same role with the “new Baker Hughes,” while GE CEO Jeffrey Immelt will be chairman and Baker Hughes CEO Martin Craighead will be vice chairman, according to the statement. The company, which will have $32 billion in combined revenue, will have dual headquarters in Houston and London.
The companies plan to discuss the merger in an investor conference call at 8:30 a.m. New York time.