GE and Baker Hughes have entered into an agreement to combine GE’s oil and gas business and Baker Hughes to create oilfield technology provider with mix of service and equipment capabilities.
The transaction will be executed using a partnership structure, pursuant to which GE Oil & Gas and Baker Hughes will each contribute their operating assets to a newly formed partnership.
GE will have a 62.5% interest in this partnership and existing Baker Hughes shareholders will have a 37.5% interest through a newly NYSE listed corporation. Baker Hughes shareholders will also receive a special one-time cash dividend of $17.50 per share at closing. The $7.4 billion contributed by GE to the new partnership will be used to fund the cash dividend to existing Baker Hughes shareholders.
The “New” Baker Hughes will have dual headquarters in Houston, Texas and London, UK.
Jeff Immelt, chairman and CEO of GE will serve as chairman of the Board of Directors and Lorenzo Simonelli, president and CEO of GE Oil & Gas will serve as president and chief executive officer. Martin Craighead, Baker Hughes chairman and CEO, will serve as vice chairman of the board. The remainder of the executive leadership team will be a combination of existing leaders from both GE and Baker Hughes.
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 & 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, chairman and chief executive officer of GE. “As we built the GE Oil & Gas business, I have always been impressed by the respect our customers have for Baker Hughes. GE Oil & Gas is a key GE business, one that fully leverages the GE Store. 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. GE investors will benefit through ownership of a stronger business with substantial synergies and an improved competitive position. The transaction is expected to add approximately $.04 to GE EPS in 2018, $.08 by 2020.”
Martin Craighead, chairman and chief executive officer at Baker Hughes, said: “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. 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. In addition, Baker Hughes shareholders will receive a special one-time cash dividend of $17.50 per share and benefit from the upside of a stronger, larger business. With employees of Baker Hughes and GE Oil & Gas coming together, the new company will be an industry leader, well-positioned to compete in the oil and gas industry while pushing the boundaries of innovation for our customers.”
Lorenzo Simonelli, who is currently president and CEO of GE Oil & Gas, said: “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. This transaction is also exciting for employees of both companies. GE Oil & Gas and Baker Hughes are an exceptional cultural fit, sharing a commitment to exceeding customer expectations. 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.”