General Electric announced on Monday the merger of its oilfield unit with Baker Hughes.
GE will inject its huge oil and gas operations into Baker Hughes and take a 62.5 per cent ownership of the combined company, which will retain the Baker Hughes brand name.
Baker shareholders will hold the rest of the company and will also receive a special US$17.50 per share dividend, a payout by GE to consummate the deal totalling US$7.4 billion.
The two companies have about $32bn in revenue and operations in 120 countries.
Directors of both have approved the deal, which now needs approval by shareholders.
“As we go forward, this transaction accelerates our capability to extend the digital framework to the oil and gas industry,” said the GE chairman and chief executive Jeff Immelt.
The merger is expected to create a stronger services company for the oil and gas exploration and production sector in the face of tough competition with the market leader Schlumberger and the No 2 player Halliburton, whose effort to take over Baker Hughes was blocked by US anti-trust regulators this year.
GE has expanded aggressively into the industry under Mr Immelt, only to be hit by the slump when crude prices lost about 75 per cent in 2014-15.
Mr Immelt said that the industry’s recovery will remain slow over the next couple of years.
“We can weather the cycle in the short term and will be very well positioned to lead the industry” when the pick-up does come, he said.
Baker Hughes shares jumped 5.5 per cent to $62.39, while GE shares rose 1.7 per cent to $29.71 in pre-market trade yesterday.
* Associated Press
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