General Electric (GE) and Baker Hughes are to merge their oil and gas sectors as global crude oil prices continue to slump.
The deal will create the second-largest player in the oil and gas industry in terms of revenue – $32bn altogether – which will operate in more than 120 countries.
The companies said the deal will allow them to cut costs by $1.6bn a year.
GE will own 62.5 per cent of the combined business, which will be publicly traded. It will contribute $7.4bn to fund a special dividend of $17.50 per share to Baker Hughes stockholders.
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This morning the price of oil remained low over the failure of Opec nations to agree a production cap. Investors hoped they would agree a deal, but another date for talks has been set for the end of November.
Earlier this month Iraq, one of the region's largest producers, said it would not be a part of such a deal.
"This transaction creates an industry leader, one that is ideally positioned to grow in any market. Oil and gas customers demand more productive solutions. This can only be achieved through technical innovation and service execution, the hallmarks of GE and Baker Hughes," said Jeff Immelt, chairman and chief executive of GE.
Martin Craighead, chairman and chief executive at Baker Hughes, said:
This compelling combination brings together best-in-class oilfield equipment manufacturing and services, and digital technology offerings for the benefit of all customers and stakeholders.
The transaction is expected to close in mid-2017, the company said.
Philip Barker, partner and head of industrials at Cavendish Corporate Finance, said he expects GE to gain from an anticipated oil market recovery without having to acquire Baker Hughes.
“The proposed $30 billion merger between General Electric CO. (GE) and Baker Hughes Inc. will create an energy powerhouse yielding more than $25 billion in revenue and will enable the enlarged group to better compete with oilfield services leader Schlumberger," he said.
The deal comes after General Electric held talks earlier this year to merge with rival Halliburton, but the $34.6bn arrangement fell through after opposition from regulators.