GE, Baker Hughes cre­ate pow­er­ful new player in en­ergy sec­tor

Kuwait Times - - TECHNOLOGY -

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. Com­bined with GE, how­ever, its an­nual es­ti­mated rev­enue will more than dou­ble to $32 bil­lion, a lot closer to Sch­lum­berger, which has an­nual rev­enue of $35.5 bil­lion. An­nounc­ing the deal Mon­day, GE Chair­man and CEO Jeff Im­melt touted tech­no­log­i­cal ad­van­tages as well, say­ing that the com­bined com­pany “ac­cel­er­ates our ca­pa­bil­ity to ex­tend the dig­i­tal frame­work to the oil and gas in­dus­try.” 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 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. 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. —AP

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