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Baker Hughes & GE merger Closes, Creates No. 2 Oilfield Services Company

July 3, 2017 | Chron

The $23 billion merger of Houston oil field services firm Baker Hughes with the oil and gas division of industrial giant GE closed on Monday morning, the companies said, creating the second largest oil field services firm in the world and changing the trajectory of one of Houston’s biggest employers.

The company, which will have dual headquarters in Houston and London, will be traded on the New York Stock Exchange under the ticker symbol BHGE.

 Lorenzo Simonelli, the former chief executive of GE Oil & Gas and new chief of Baker Hughes, a GE company, said the combination will join Baker Hughes’ oil field expertise with GE’s industrial computing power and “transform” the industry. The new company, he said, will have the capacity to expand into all parts of the oil and gas business, from the wellhead to the pipeline to the refinery — and even into power generation.

“So, what does Baker Hughes do for us?” Simonelli said in an interview with the Chronicle on Friday. “It really helps to complete the full integration of what we’ve done, full-stream.”

Simonelli reiterated his commitment to Houston, saying he will keep a home here, and be a “hands-on” boss. Still, he acknowledged Houston will almost certainly lose some employees in the deal.

“Look we’ve always said this is a complementary transaction, and we feel good about the two portfolios coming together and being additive to our customers,” Simonelli said. “That being said, there are cost synergies.”

 The company aims to cut at least $1.2 billion out of its combined expenses by 2020, including the closure of some of the 40 facilities here in Houston.

The merger’s integration team is working through specifics now, Simonelli said. “We clearly need a lot of those properties,” he said. “Is there people impact? Yes.”

The merger essentially doubles Baker Hughes’ size, to 70,000 employees in 120 countries, by creating the new BHGE. The new company will break into four divisions: Oilfield Services, Oilfield Equipment, Digital Solutions, and Turbomachinery and Process Solutions.

Baker Hughes shareholders overwhelmingly approved the deal on Friday to create the new firm, “Baker Hughes, a GE company.”

The shareholder vote was the last of three major hurdles that the merger had to clear. It secured approvals from the European Union in May and the U.S. Justice Department earlier this month.

Analysts, while split on the potential effectiveness of the merger, don’t doubt that it will help both companies. Baker Hughes struggled through the oil bust. And its failed merger with Houston oil field services provider Halliburton — scuttled last year after the Justice Department sued to block the deal — left it further weakened, despite Halliburton’s $3.5 billion breakup payment.

Simonelli will serve as CEO of the new company. Baker chief Martin Craighead will become vice chairman. And GE, which had revenue of $123.7 billion in 2016, will add new resources to a company that had become a distant No. 3 in the sector, behind Halliburton and global energy services leader Schlumberger.

The new Baker Hughes now trails only Schlumberger in revenues and headcount.

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