NEW YORK (TheStreet) -- Baker Hughes (BHI)  is merging with General Electric's (GE) oil and gas business in a deal valued at $32 billion as a way to provide upside for both companies, Baker Hughes CEO Martin Craighead said on CNBC's "Squawk on the Street" on Monday morning. 

"This is so value enhancing. It's a scope play, rather than just a scale play. It's all about being able to take it from molecule to megawatt," Craighead said. 

This deal will also allow the newly formed company to give customers what they want, which is more productivity in the oil industry, he noted. "They've got to drive efficiency out of their core asset, which is a reservoir. We bring that expertise. That's our domain, whether it's drilling completion or production optimization," Craighead explained. 

By structuring the deal as a merger rather than an acquisition, it "takes the timing risk completely off the table," he said, noting that most say the industry is in a downturn.

Lower oil prices have led to layoffs, but the combined company's "much bigger spend" should prevent job cuts, Craighead claimed.

"These are the efficiencies that will come and get the costs down in our products and bring cost savings we can pass on to the customer community and actually protect the workforce," he said. 

Baker Hughes shareholders will receive a special one-time cash dividend of $17.50 per share and will own 37.5% of the combined company. 

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Shares of Baker Hughes were slumping by 6.04% to $55.56 in early afternoon trading, while shares of GE were higher. 

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.

TheStreet Ratings team rates Baker Hughes as a Sell with a ratings score of D+. This is driven by a few notable weaknesses, which the team believes should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks the team covers.

You can view the full analysis from the report here: BHI

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