New York Times (10/31, Bray, Subscription Publication) Wall Street Journal (10/31, Cimilluca, Mattioli, Benoit, Subscription Publication) AP (10/31) Reuters (10/31, Scheyder, Hirsch)

Thursday, January 25, 2018

---

The New York Times (10/31, Bray, Subscription Publication) reports General Electric said Monday that it would combine its oil and gas business with Baker Hughes, “looking to increase its scale to battle the effects of a prolonged slump in oil prices that has eaten into results.” GE referred to the new company as the “new” Baker Hughes and it would be “one of the world’s largest providers of equipment, technology and services to the oil and gas industry.” The Wall Street Journal (10/31, Cimilluca, Mattioli, Benoit, Subscription Publication) reports that GE would benefit from such a combination and could benefit from savings and synergies without having to pay for the full acquisition of Baker Hughes. GE estimates the merger will add roughly four cents to its earnings per share in 2018 and eight cents by 2020. After two years of the energy price slump, GE and some competitors are starting to be optimistic. The AP (10/31) reports the new combined company will be “a powerful player in an energy sector buffeted by years of weak prices.” Reuters (10/31, Scheyder, Hirsch) reports says the GE-Baker Hughes deal is “the clearest signal yet that consolidation is picking up in the energy sector as companies face long-term lower oil prices.” GE CEO Jeff Immelt said on a call with investors Monday that “The transaction assumes a slow recovery (in oil prices), really $45 to $60 per barrel through 2019, and this seems reasonable.” The size of the GE-Baker Hughes merger and the timing “amid a recent spate of deals have led advisers and industry analysts to think companies have readjusted to lower oil prices in their strategies and the tide is turning.”