GE-Baker Hughes Merger Approved By European Commission

General Electric Company (NYSE:GE) recently announced that the European Commission approved the megadeal under EU’s merger control norms. Per the deal, Baker Hughes Incorporated (NYSE:BHI) will merge with GE Oil & Gas, which is based in London to form a new entity, which will be known as Baker Hughes, a GE Company. The deal, announced on Oct. 31, 2016 is likely to close in mid-2017.

Houston, TX-based Baker Hughes is one of the major oilfield service companies in the world, providing an array of services to the global oil and gas industry. The company is a major supplier of wellbore-related products and technology services and systems. It caters to drilling, pressure pumping, formation evaluation, completion and production, and reservoir technology. It also offers consulting services to the worldwide oil and natural gas industry.

GE Oil & Gas and Baker Hughes will combine their assets to form a $32 billion worth entity, which will be listed on the New York Stock Exchange. Baker Hughes shareholders will own its 37.5% shares, whereas General Electric will own the remaining 62.5%.

The new company will have dual headquarters in Houston and London. President and CEO of GE Oil & Gas, Lorenzo Simonelli will be CEO of the new company while Jeff Immelt, CEO of General Electric will be the chairman. Martin Craighead, Baker Hughes’ chairman and CEO, will serve as the vice chairman.

The collaboration will help the companies improve their top line as well as expand foothold. It will also help them provide their clients best in class services compared to their peers.

Recently, General Electric inked memorandums of understanding (MoU) and deals worth $15 billion with Saudi companies. These deals included a MoU with Aramco for the digital transformation of Aramco’s operations in order to generate $4 billion in annual productivity improvements. In addition, it recently entered into a joint venture with Dussur to manufacture gas turbines in Saudi Arabia by the end of the year. The deal is worth 1 billion riyals ($267 million). This deal aims to develop the industrial sectors in Saudi Arabia as part of the government's plan to create jobs and diversify the oil-dependent economy. The joint venture followed a MoU signed between both the companies last year, per which, the deal is expected to draw nearly 3.75 billion riyals of investment by both the companies in 2017. According to the deal, General Electrics has stake of 45% while Dussur has 55% stake.

Despite these strategic steps taken by the company to improve their revenues, General Electric has underperformed the Zacks categorized Diversified Operations industry in the last one month owing to macroeconomic challenges and fluctuations in currency exchanges. The company’s lost 5.7% compared with a 1.3% decline for the industry.

General Electric currently has a Zacks Rank #3 (Hold). A couple better-ranked stocks in the industry include 3M Company (NYSE:MMM) , and Crane Co. (NYSE:CR) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3M has a long-term earnings growth expectation of 9.7%. It has a positive earnings surprise history with an average of 1.3% in the trailing four quarters, beating estimates thrice.

Crane has a long-term earnings growth expectation of 10.1%. It has a positive earnings surprise history with an average of 8.4% in the trailing four quarters, beating estimates in each.

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