Firms: Clifford Chance, Shearman & Sterling (General Electric); Davis Polk (Baker Hughes)
Deal: A full-stream digital industrial services company has been established following a deal between General Electric (GE) and Baker Hughes. The new company will operate under the name 'Baker Hughes'.
Value: USD $32 billion of combined revenue
Key players: The Clifford Chance team advising GE on the competition aspects of the deal was led by partner Dave Poddar (pictured). Associate Mark Grime assisted.
Baker Hughes provides the oil and gas industry with equipment and technology capabilities. The company’s board of directors, along with GE’s, has approved the merger of Baker Hughes with GE’s oil and gas business to provide “a unique mix of service and equipment capabilities”.
The deal will be executed by way of partnership structure. The new company's board of directors will be led by GE Oil & Gas CEO Lorenzo Simonelli, GE CEO and chairman Jeff Immelt and Baker Hughes vice-chairman Martin Craighead.
It is hoped that the revamped Baker Hughes will become “a world-leading oilfield technology provider”. The combined revenue and operations of the company is expected to be worth $32 billion, with an operational presence in over 120 countries. It will have dual headquarters in Houston and London.
Under the terms of the agreement, GE will own 62.5 per cent of the company. Baker Hughes shareholders will receive a special one-time cash dividend of $17.50 per share and 37.5 per cent of the new company at the closing of the transaction. The transaction is expected to close in mid-2017.
The combination of GE’s expertise and the oilfield service capabilities offered by Baker Hughes will be key to meeting the aim to “provide best-in-class physical and digital technology solutions for customer productivity”, a statement released by Clifford Chance said.
Mr Immelt said the new company will be well placed to “grow in any market”, adding that he believed the deal would add approximately eight cents to GE's earnings per share by 2020.
He emphasised that advanced digital capabilities are essential for the company’s future direction.
“This can only be achieved through technical innovation and service execution,” Mr Immelt said.
“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,” he said.
Mr Simonelli said the merger was an “exceptional cultural fit” for both companies, from which clients and employees are expected to benefit.
“Both companies’ employees will benefit significantly from being part of a larger, stronger company that is positioned for long-term growth,” Mr Simonelli said.
“We look forward to combining the digital solutions and technology from the GE Store with the domain expertise of Baker Hughes and its culture of innovation in the oilfield services sector.”