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Baker Hughes Completes General Electric Merger, Forms BHGE

The takeover of Baker Hughes Inc. BHI was completed by General Electric Co. GE where the latter integrated its oil and gas equipment and service operations. This has made General Electric the world's second largest oilfield service provider in terms of revenue.

The new company – Baker Hughes, a GE company – will start trading on Jul 5 on NYSE under the ticker "BHGE".

The merged company, with headquarters in London and Houston, will have about $23 billion in annual revenues and provide oilfield gear along with blowout preventers, pumps, drilling, chemicals, other products and services for oil producers in 120 countries.

The deal helps Baker Hughes to expand and become an important player in the industry. This is a positive sign for the company after antitrust concerns ruined a tie-up last year with rival Halliburton Co. HAL. The GE deal takes the merged business past Halliburton to compete with only Schlumberger NV SLB for dominance in the global oilfield service market.

Meanwhile, the deal helps GE to focus more on the oil and gas sector, particularly in North America, while protecting the parent company's earnings from the energy industry's boom and bust cycles. General Electric's oil and gas-related businesses will be folded into the new company, with a partnership of 62.5% held by General Electric. Baker Hughes shareholders will own the remaining and receive a one-time dividend of $17.50.

The announcement of the deal last autumn implied that the recovery in oil prices would be $60 per barrel by 2019. This increase seems unlikely with excess supply of crude prevailing worldwide, which will bring prices below $50.

However, the executives at the new company believe that the merger is expected to help customers perform better if prices stay low.

The new company will have about 70,000 employees and be headed by Simonelli and 14 senior executives. Only five of those executives will be legacy Baker Hughes employees, with most of them from General Electric.

The company will have access to General Electric's research and development facilities and be able to access General Electric’s Predix software and analytics.

Shares of the company have lost 4.4% over the last three months while the Zacks categorized Oil & Gas – Field Services industry has declined 13.2% in the same time span.

Baker Hughes currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Halliburton Company (HAL): Free Stock Analysis Report
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