GE merges oilfield unit with Baker Hughes

GENERAL Electric said yesterday it would combine its oil and gas business with Baker Hughes, looking to increase its scale to battle the effects of a prolonged slump in oil prices that has eaten into results and prompted job cuts across the petroleum sector.

The new company, which GE referred to as the “new”Baker Hughes, would be one of the world’s largest providers of equipment, technology and services to the oil and gas industry. In 2015, the businesses had $32 billion in revenue, and operations in more than 120 countries. It also would be better able to compete with Schlumberger and other oil services companies.

Oversupply in the oil industry has sapped prices in the past two years, and there is little expectation that prices will rise much more before the end of the year. But expectations that the Organization of the Petroleum Exporting Countries cartel could freeze or cut production has helped send prices higher recently.

The deal came after Baker Hughes and Halliburton called off a $35 billion merger in May, following a lengthy regulatory review and a lawsuit by the Justice Department to block the transaction on antitrust grounds.

After the deal, GE would own 62.5 percent of Baker Hughes. Shareholders of Baker Hughes would own the rest.

“This transaction creates an industry leader, one that is ideally positioned to grow in any market,” Jeffrey Immelt, the GE chairman and chief executive, said in a news release.

“Oil and gas customers demand more productive solutions.’’

Under the terms of the deal, Baker Hughes shareholders would receive a one-time cash dividend of $17.50 a share. The dividend would be funded by $7.4 billion contributed by GE.

New board to have nine directors

Baker Hughes shares closed at $59.12 on Friday.

The transaction is subject to approval by regulators and Baker Hughes shareholders. It is expected to close in mid-2017.

It would be structured as a partnership with GE and Baker Hughes each contributing assets to the new com- pany and GE holding a controlling stake.

The combined company would have headquarters in Houston and London, with Immelt serving as chairman and Lorenzo Simonelli, the president and chief executive of t he unit GE Oil & Gas, ser v ing as president and chief executive.

Martin Craighead, the Baker Hughes chairman and chief executive, would serve as vice chairman.

The new Baker Hughes board would have nine directors, with five from GE, including Immelt.

Centerview Partners and Morgan Stanley and the law firm Shearman and Sterling advised GE, while Goldman Sachs and law firm Davis Polk advised Baker Hughes.