The transaction, which is expected to close by the middle of 2017, entails Baker Hughes shareholders receiving a special one-time cash dividend of $17.50 per share and 37.5% of the new company. Meanwhile, GE will retain 62.5% ownership of the newly-formed company, will be executed using a partnership structure.
GE Oil & Gas and Baker Hughes will each contribute their respective operating assets, and GE will put $7.4 billion into the deal, which will then be paid as the aforementioned cash dividend to existing Baker Hughes shareholders.
The “New” Baker Hughes promises to be a unique equipment, technology and services provider with some $32 billion in combined annual revenue.
The two companies commented via press release:
“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.”
GE shares rose $0.17 (+0.58%) to $29.39 in premarket trading Monday. Prior to today’s merger announcement, GE had fallen 6.2% year-to-date.
Meanwhile, Baker Hughes shares surged $7.38 (+12.48%) to $66.50 in premarket trading. Prior to today’s news, BHI had already jumped 28.1% year-to-date amid a partial recovery in the oil and gas industry.