The Offshore Engineer reports that GE and Baker Hughes are teaming up to form the “new” Baker Hughes, a company that will be led by current GE Oil & Gas CEO Lorenzo Simonelli and have dual headquarters in Houston and London.
The agreement will combine GE’s oil and gas business (GE Oil & Gas) and Baker Hughes, in what the two hope will be a leading equipment, technology and services provider with US$32 billion of combined revenue and operations in more than 120 countries.
The deal has already been unanimously approved by the boards of directors of both companies. At closing, which is expected in mid-2017, Baker Hughes shareholders will receive a special one-time cash dividend of $17.50 per share and 37.5% of the new company, with GE owning the remaining 62.5%. The deal is still subject to approval by Baker Hughes shareholders, regulatory approvals, and other customary closing conditions.
Both GE and Baker Hughes expect to generate “total run-rate synergies” of $1.6 billion by 2020, which has a net present value of $14 billion, that will primarily be driven by cost out, and positioned for growth as the industry rebounds.
“By drawing from GE technology expertise and Baker Hughes capabilities in oilfield services, the new company will provide best-in-class physical and digital technology solutions for customer productivity,” the two companies said in a joint statement.
The new company will combine the digital solutions, manufacturing expertise and technology from GE, in addition to the track record of success Baker Hughes has in the oilfield services sector.
“With combined revenue of over $32 billion, the product portfolio of GE Oil & Gas and Baker Hughes in drilling, completions, production and midstream / downstream equipment and services will create the second largest player in the oilfield equipment and services industry,” according to the statement from the two companies. “Customers should expect sustainable innovation and integration that will deliver valuable outcomes. Both companies have invested even in the downturn and have strong, complementary competitive scope across the industry. From GE’s fullstream oil and gas manufacturing and technology solutions spanning across subsea and drilling, rotating equipment, imaging and sensing, to the Baker Hughes portfolio in drilling and evaluation and completion and production, the combined company will be moving beyond oilfield services and into oil and gas productivity solutions.”
Upon closing, the new Baker Hughes board will consist of nine directors: five of whom, including Chairman Jeff Immelt will be appointed by GE and four, including Vice Chairman Martin Craighead will be appointed by Baker Hughes.
“This transaction creates an industry leader, one that is ideally positioned to grow in any market. Oil and gas customers demand more productive solutions. This can only be achieved through technical innovation and service execution, the hallmarks of GE and Baker Hughes,” said Jeff Immelt, GE chairman and CEO. “As we go forward, this transaction accelerates our capability to extend the digital framework to the oil and gas industry. An oilfield service platform is essential to deliver digitally enabled offerings to our customers. We expect Predix to become an industry standard and synonymous with improved customer outcomes.”
“This compelling combination brings together best-in-class oilfield equipment manufacturing and services, and digital technology offerings for the benefit of all customers and stakeholders,” Martin Craighead, Baker Hughes chairman and CEO said. “The combination of our complementary assets will create a platform capable of seamless integration while we enhance our ability to deliver optimized and integrated solutions and increase touch points with our customers.”
“This transformative transaction will create a powerful force in the oil and gas market as we continue to drive long-term value for our customers and shareholders,” Simonelli said. “Both companies’ employees will benefit significantly from being part of a larger, stronger company that is positioned for long-term growth. We look forward to combining the digital solutions and technology from the GE Store with the domain expertise of Baker Hughes and its culture of innovation in the oilfield services sector.”
The full release is available on http://www.businesswire.com/news/home/20161031005488/en/