GE, Baker Hughes consider oil and gas merger

GE AND Baker Hughes are in talks to merge their respective oil and gas divisions, according to reports in the Wall Street Journal.

The US paper says that “people familiar with the matter” had told it that GE had approached Baker Hughes, but that full details weren’t known and a deal is not certain. It’s thought that the oil and gas divisions merger deal could be worth more than US$20bn. The Wall Street Journal says that if a merger goes ahead, it may well be spun out as a separate, publicly-traded company, which would allow GE to separate the struggling oil and gas division from its more profitable divisions, such as power generation and aircraft engine production.

The Wall Street Journal had originally reported a full merger between the two companies, but later backtracked after receiving further information.

GE has not confirmed or denied the rumour about a partnership between the two oil and gas divisions, saying only: “We are in discussion with Baker Hughes on potential partnerships. While nothing is concluded, none of these options include an outright purchase.”

Baker Hughes declined to comment when approached by The Chemical Engineer.

Baker Hughes is no stranger to merger deals, after Halliburton agreed to pay US$35bn for the company in 2014. However, the deal was blocked by the US Department of Justice, who feared that the merger would create a “duopoly” in the US industry, and after resistance from European antitrust authorities as well, the two companies called off the deal in May. With the continued low oil prices, many companies across the sector are looking to merge or collaborate more closely as they seek to cut costs to survive the downturn. This includes major players like Schlumberger, which bought Cameron in August 2015, and 2015’s mega-merger between Shell and BG Group. Analysts believe more such mergers are likely while oil prices remain low.