General Electric announced on Monday the merger of its oilfield unit with Baker Hughes.
GE will inject its huge oil and gas operations into Baker Hughes and take a 62.5 per cent ownership of the combined company, which will retain the Baker Hughes brand name.
Baker shareholders will hold the rest of the company and will also receive a special US$17.50 per share dividend, a payout by GE to consummate the deal totalling US$7.4 billion.
The two companies have about $32bn in revenue and operations in 120 countries.
Directors of both have approved the deal, which now needs approval by shareholders.
“As we go forward, this transaction accelerates our capability to extend the digital framework to the oil and gas industry,” said the GE chairman and chief executive Jeff Immelt.
The merger is expected to create a stronger services company for the oil and gas exploration and production sector in the face of tough competition with the market leader Schlumberger and the No 2 player Halliburton, whose effort to take over Baker Hughes was blocked by US anti-trust regulators this year.
GE has expanded aggressively into the industry under Mr Immelt, only to be hit by the slump when crude prices lost about 75 per cent in 2014-15.
Mr Immelt said that the industry’s recovery will remain slow over the next couple of years.
“We can weather the cycle in the short term and will be very well positioned to lead the industry” when the pick-up does come, he said.
Baker Hughes shares jumped 5.5 per cent to $62.39, while GE shares rose 1.7 per cent to $29.71 in pre-market trade yesterday.
* Associated Press
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5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
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CAF Champions League semi-finals first-leg fixtures
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Borussia Dortmund v Schalke (4.30pm)
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Analysis
Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more