INDUSTRIAL giant General Electric Co. and oilfield services company Baker Hughes, both beset by difficulties during oil’s two-year price rout, may have a clear path out of the doldrums: join forces.

    GE said late Thursday it was in discussions with Baker Hughes Inc. but not to acquire the company outright.

    GE’s oil and gas division has fought to get the scale the conglomerate enjoys in other industries. Despite efforts to grow through a series of acquisitions, the division has faced weaker revenues during oil’s downturn than other units of GE. Organic growth in oil and gas has lagged other sectors.

    Baker Hughes had its own growth difficulties, spending a year and a half stuck in limbo amid a US$28 billion merger with Halliburton that was ultimately scrapped after opposition from antitrust regulators.

    Following the termination of the Halliburton merger, Baker Hughes CEO Martin Craighead has said the company is well positioned to focus on developing products that lower costs and maximize production for operators in the oil and gas industry.

    With oil prices rebounding to US$50 a barrel, M&A activity could tick up as investors see the two-year rout in crude ending. A partnership with Baker Hughes could allow GE’s oil and gas division to transform itself into a larger player in the sector to better compete with oilfield services leader Schlumberger Inc., and could give Baker Hughes a chance to redefine itself following the failed merger.

    For GE, which strives to be in the top of each industrial sector, oil and gas has been a harder area to develop, said Ed Hirs, energy fellow at the University of Houston. Baker Hughes offers good capitalization and scale for the smaller GE unit.(SD-Agencies)