What's going on?

General Electric (GE), one of America�s biggest companies, is combining its oil and gas business with Baker Hughes, a company that provides services to energy producers. The result? A new $32 billion behemoth in the US energy space!

What does this mean?

GE will own about 60% of the new company, while Baker Hughes� shareholders will own the rest. Baker Hughes� shareholders are also getting paid a one-time cash payment. The new company, apparently still going to be called Baker Hughes, will be a separate, publicly traded company just like any other � except that GE will be a majority shareholder.

Why should I care?

For the stocks: �It�s a complex transaction to value.
GE�s oil and gas business has never been a separate company, so it�s tougher than usual to value what the new company should be worth and whether it�s a good deal for shareholders of either company. The strategic rationale is that the combination will create a huge amount of synergies, i.e. cost savings and opportunities to sell complementary products (like drilling equipment alongside production analytics).


The bigger picture: October was the biggest month ever for announced US mergers and acquisitions. (tweet this)
No other month in history has seen the volume of deals that occurred in October. Why? Well, this low economic growth environment that we keep talking about has something to do with it. Companies are hunting out synergies as a way to boost their profit in the absence of natural growth. It�s worth noting, however, that not all of these deals will necessarily get approved: the US government could block some of them if they are deemed to hurt competition too much in their respective industries.