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US: GE Creates $32 Billion Oil-Services Giant With Baker Hughes Deal

 |  October 31, 2016

General Electric is creating a $32 billion oil business by combining its petroleum-related operations with Baker Hughes Inc., betting on a rebound for an industry mired by a historic slump in crude prices.

The new company will be one of the industry’s largest players, bringing together a portfolio of capabilities spanning oilfield services, equipment manufacturing and technology. GE will own 62.5 percent of the merged entity, which will be publicly traded, the companies said Monday. The deal is expected to close in the middle of next year.

“It’s got a diversified portfolio that can weather the cycles better than anybody,” GE Chief Executive Officer Jeffrey Immelt said in a telephone interview.

Creating a partnership lets GE deepen its bet on oil and prepare for a possible rebound without absorbing all of Baker Hughes, which was the target in a failed acquisition this year by Halliburton Co. The arrangement also enables Immelt to keep expanding after billions in deals to gobble up other equipment and service companies, including Lufkin Industries Inc. and Dresser Inc.

“The new entity will be capable of providing end-to-end oilfield equipment, technology and services solutions at scale,” Nicholas Heymann, an analyst with William Blair & Co., said in a note to clients.

The transaction is subject to approval by regulators and Baker Hughes shareholders, as well as other customary closing conditions. GE will contribute $7.4 billion to fund a special dividend of $17.50 a share to Baker Hughes stockholders.

Full Content: Bloomberg

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