On Monday, GE will announce a planned new oil & gas entity with Baker Hughes.
There will be an investor webcast that investors won’t want to miss at 8:30 AM EST – more info here.
What is Bakers Hughes?
Bakers Hughes is one of the largest oil-field-services companies in the world. They help energy producers find and extract oil & gas deposits by selling them equipment, tools, and labor. Bakers Hughes trades under the ticker BHI.
What does this mean for GE Shareholders?
GE’s oil & gas segment has been hit hard by the ongoing slump in oil prices, with operating profit projected to be down by 30% for the year. This merger appears to be a cost-effective way (instead of GE just buying Baker Hughes) to play the long-hoped for recovery in oil prices.
In this proposed partnership GE will contribute it’s O&G business and cash, and will be majority controlled by GE.
It’s important to keep in mind that this is not a guaranteed deal. The last merger agreement BHI entered into with Halliburton earlier this year was rejected by anti-trust regulators.
Still, the market has reacted well initially to the news, with Baker Hughes blasting up 8.14%, and GE up 2.1% higher on Friday. Comments on message boards and Seeking Alpha seem to be somewhat mixed.
Assuming the deal goes through, it will have publicly traded shares and will be majority owned and controlled by GE. I am assuming current shareholders may gain shares of the new entity.
Next week should be fun
8:30 am EST is 5:30 am where I am, so I’ll do my best to set the alarm and give myself a realistic sub-50% chance of getting up. Assuming I do, I plan to update this post with my reaction to any new details that are forthcoming in the webinar.
Given the latest developments in the presidential race (ie. Weinergate) it’s possible that next week through election could be filled with volatility and therefore opportunities, so I’ll be looking to add more shares of GE (& other portfolio holdings) on any meaningful pullback.