[Editor's note: This is a developing story. Check back for updates.]

Baker Hughes Inc. (NYSE: BHI), left at the altar in the failed merger with Haliburton Co. (NYSE: HAL), will combine with GE Oil & Gas, the companies said Oct. 31.

General Electric Co. (NYSE:GE) and Baker Hughes said they will merge into a new oilfield technology company with a value of $32 billion. As part of the deal, GE will give Baker Hughes shareholders’ a $7.4 billion sweetener, with shareholders receiving a special one-time cash dividend of $17.50 per share.

The merger will create a “new Baker Hughes,” with GE owning a 62.5% majority interest in the company. Baker Hughes would hold the remaining 37.5% of the company.

The combined company will bolster its “competitive mettle" with competitor Schlumberger Ltd. (NYSE: SLB) at an opportune time in the oil and gas cycle, said Gautam Khanna, an analyst with Cowen and Co.

However, he said the company's financial metrics are "so-so."

“The transaction is only marginally accretive to GE’s 2018 estimated EPS despite a sizeable use of GE’s M&A firepower,” Khanna said.

GE estimates a $0.04 (2%) accretion in from the transaction. The deal employs $7.4 billion out of GE’s M&A war chest of about $20 billion. However, the transaction assumes a slow recovery of $45 to $60 per barrel (bbl) through 2019.

GE and Baker Hughes said the company would create $1.68 billion in synergies through $1.2 billion in cost savings and about $400 million in annual revenue by 2020.

GE and Baker Hughes said the company would create $1.68 billion in synergies through $1.2 billion in cost savings and about $400 million in annual revenue by 2020.

The deal is structured to put GE’s oil and gas assets under Baker Hughes control. In exchange, GE will own the controlling stake and control of the board of directors of the new company.

GE and Baker Hughes said the combination will lead to cost savings over multiple business areas.

The new Baker Hughes will be as much an oilfield services company as it will a technology enterprise driven by GE’s expertise.

The new company will provide best-in-class physical and digital technology solutions for customer productivity, the companies said.

“Some of our earliest conversations centered on a technology venture in the realm of digitization and big data,” said Baker Hughes CEO Craig Martinhead in an Oct. 31 conference call.

“With the ability to pair the reservoir knowledge and intelligent products of legacy Baker Hughes with GE’s industry leading digital platform, we see an opportunity to see unleash the power of digitization and big data that has long been anticipated in the oil and gas sector.”

The company could face anti-trust concerns, which were at the heart of the failure to combine Baker Hughes and Halliburton.

“The only area where we see any potential anti-trust issues is in artificial lift where BHI is the number two player behind SLB and GE Oil & Gas is number four,” said Kurt Hallead, co-head of global energy research for RBC Capital Markets LLC.

Combined, the two companies would have a 30% share of the artificial lift market, which could create antitrust scrutiny from the U.S. Department of Justice, Hallead said.

“The two companies also modestly overlap in wireline technology, but it is a small component of GE’s mix,” Hallead said.

The merger would further consolidate major plays in the services industry. In May, Technip and FMC Technologies Inc. (NYSE: FTI) said they would combine in a $13 billion, all-stock deal. In April, Schlumberger acquired Cameron International.

The GE-Baker Hughes merger is expected to close in mid-2017.

Darren Barbee can be reached at dbarbee@hartenergy.com.

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