GE Just Became the 2nd Largest Oil Services Co.

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GE Just Became the 2nd Largest Oil Services Co.

By Shoshanna Delventhal | July 5, 2017 — 3:10 PM EDT

Multinational conglomerate General Electric Co. (GE) has announced the completion of the merger between GE Oil & Gas and Baker Hughes Inc. (BHI) in a deal that will secure the company’s spot as the world’s No. 2 oilfield service provider.

Industrial conglomerate General Electric saw its shares jump 2% on Monday on the announcement of the megadeal, as BHI stock soared 5.8% on its last day of trading to the top of the S&P 500.

Weathering Industry Cycles

The American industrial giant is bullish its ability to bring together the companies’ “capabilities across the full value chain of oil and gas activities—from upstream to midstream to downstream.”

GE’s decision to double down on its petroleum-related operations comes amid a historic decline in crude oil prices. However, Chief Executive officer (CEO) Jeffrey Immelt suggests that the deal, expected to close mid-2018, will result in a diversified portfolio spanning oilfield services, equipment manufacturing and technology that can “weather the cycles better than anybody.”

A One-Time Dividend Payment

Analysts at RBC believe the transaction enhances Baker Hughes’ competitive position. “We remain positive on BHI’s combination with GE O&G and are encouraged by the potential for revenue upside from digital integration and shifting focus to products and technology,” wrote analyst Kurt Hallead.

GE owns 62.5% of the newly combined entity trading under the ticker BHGE, while Baker Hughes and its shareholders own a 37.5% stake. All shares traded under the previous BHI ticker have been converted to BHGE, while a one-time dividend payment of $17.50 per share. Due to the special dividend, BHGE opened on Wednesday at $40.80, down 29.13% from BHI’s close on Monday.

Shares of Boston-based GE are trading down about 0.6% on Wednesday afternoon at $27.28, reflecting an approximate 10.4% decline over the most recent 12-month period and a 13.4% dip year-to-date (YTD). (See also: General Electric to Merge Oil and Gas Business With Baker Hughes.

Published at Wed, 05 Jul 2017 19:10:00 +0000

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