General Electric Co (GE) and Baker Hughes Inc have cleared a second major antitrust hurdle in their effort to create the world’s second-biggest oilfield services provider.
GE on Monday won approval from the US Department of Justice to combine its oil and gas business with Baker Hughes.
The clearance follows by two weeks a similar decision by European regulators, and comes just hours after GE said that Jeffery Immelt, the deal’s architect, will step down as CEO. Immelt will serve as chairman of the new Baker Hughes when the deal closes in the middle of this year.
As part of its agreement with US officials, GE must sell its water and process technologies business, according to a court filing Monday in Washington.
In March, the company said it would sell its water unit to the French utility Suez SA and a Canadian pension fund for 3.2 billion euros (US$3.6 billion).
“Today’s milestone represents significant progress toward creating an oil and gas productivity leader positioned to deliver value for customers, employees and shareholders,” GE and Baker Hughes said on Monday in a joint statement.
The new company will be one of the industry’s largest players, bringing together a portfolio of capabilities spanning oilfield services, equipment manufacturing and technology.
GE will own 62.5 percent of the merged entity, which will be publicly traded.
Creating a partnership lets GE deepen its bet on oil and prepare for a possible rebound without absorbing all of Baker Hughes, which was the target in a failed acquisition by Halliburton Co.
The new company, which will keep the Baker Hughes name, will leapfrog Halliburton to become the world’s second-largest oilfield-service provider and equipment-maker, trailing only Schlumberger Ltd.
“We are continuing to work constructively with the relevant government regulators to achieve the necessary approvals and expect to close the transaction in mid-2017,” Melanie Kania, a spokeswoman at Baker Hughes, said on Monday in an e-mail.
Baker Hughes has scheduled a special shareholders meeting for June 30 in Houston to seek approval of the tie-up.
The US Department of Justice said in a statement that it required the sale of the water and process unit because the merger would otherwise reduce competition for refinery chemicals and services in the US, leading to higher prices and a reduction in service quality.
“Today’s action will ensure that oil and gas refiners continue to receive competitive prices for the chemicals and services needed to produce oil, gasoline and other refined petroleum and natural gas products,” said Andrew Finch, the acting chief of the department’s antitrust division.
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