General Electric Co. is combining its oil services and operations with Baker Hughes Inc. as it prepares for a rebound in the troubled industry. GE will own 62.5% of the merged entity, the companies said Monday. The deal is expected to close in the middle of 2017.
Baker Hughes, which was the target of a failed acquisition this year by Halliburton Co., will let GE deepen its bet on oil while the influx of capital will enable further expansion of Baker Hughes as it absorbs other equipment and service companies. Baker Hughes terminated plans to be acquired by Halliburton earlier this year after failing to win antitrust approval from regulators. The GE deal isn’t likely to face the same hurdles though it is still a concern.
As oil services contractors continue to cut costs amid the downturn, more partnerships such as the GE deal are expected. With at least 100 North American oilfield-service companies going bankrupt in 2015 and 2016, according to a tally by law firm Haynes & Boone, the industry is undergoing significant consolidation and scaling back. Exploration services in particular has been devastated by spending cuts as smaller customers went bankrupt and larger customers conserved cash to buy existing reserves.