$30bn Oil Merger Likely Between GE and Baker

Both companies are hosting an investor webcast at 8.30am ET, most likely to announce the deal.

General Electric's oil and gas unit is close to signing a merger deal with Baker Hughes, one of the world's largest oil field services companies. This deal, which could be worth approximately $30bn (£24.61bn), could be announced as early as Monday (31 October), according to reports.

The American conglomerate GE is considering to combine its own oil and gas operations with Texas-based, Baker Hughes. GE had confirmed the same in a statement last week and said, "We are in discussion with Baker Hughes on potential partnerships. While nothing is concluded, none of these options include an outright purchase."

According to the websites of both companies, GE and Baker Hughes are hosting an investor webcast on Monday at 8.30am ET. However, more details such as the topic of discussion and speakers involved were not mentioned.

Unnamed sources cited by the Wall Street Journal further said that GE would contribute cash to the newly-merged entity, which would have publicly traded shares. The new entity will be majority-owned and controlled by GE, the sources noted.

Nonetheless, there is no guarantee whether the deal would go through as it could face regulation issues that Halliburton encountered while trying to acquire Baker Hughes.

In November 2014, US oil-drilling giant Halliburton had agreed to buy Baker Hughes in a cash and stocks deal. This was aimed to create an oilfield services giant to help take on market leader Schlumberger. Both companies had at that the time agreed to try and complete the deal by 30 April 2016.

But on 1 May 2016, the companies issued a statement and said that the proposed $28bn deal would not materialise. They added that the move was amid challenges in obtaining regulatory approvals from authorities in both, the US and Europe.

The current GE-Baker Hughes deal could be beneficial for both companies as the merger could create a company with revenues of more than $25bn that could also have various synergies. This could bring down costs in a more efficient manner to better compete with larger rivals such as Schlumberger.

Another advantage for GE is that it would not have to pay for a full acquisition of Baker Hughes. This in turn will enable GE to benefit from an expected recovery in the industry at a lesser cost than otherwise.