Jeff Immelt is out! John Flannery is in! Nelson Peltz is...not commenting. Everyone else is.

But two important pieces of news about General Electric (NYSE:GE) came out in recent days that could have even bigger effects on the industrial company and its stock price than the C-suite shakeup. And with incoming CEO Flannery being coy about his plans and his outlook for the company, here's the story investors should be following as they decide whether to buy GE stock.

Wastewater treatment plant

GE will sell its water unit to gain approval from U.S. and Australian regulators for its Baker Hughes acquisition. Image source: Getty Images.

Immelt's folly

Outgoing CEO Immelt invested General Electric heavily in the oil and gas industry, building up its oilfield services and equipment manufacturing unit right before the bottom fell out of the energy market -- a multibillion-dollar acquisition strategy that has been heavily criticized by investors and analysts alike. The company's oil and gas business has been weighing down earnings reports for years, posting heavy losses that needed to be absorbed by outperforming units like aviation and power. 

But Immelt struck a deal to buy oilfield services major Baker Hughes (NYSE:BHI), with the plan of merging it with GE's oil and gas unit, and then spinning the resulting business off as a separate publicly traded company in which GE would retain a controlling stake. That would be good for investors because it would turn "the new Baker Hughes" into the second-largest oilfield services company in the world -- edging out rival Halliburton, but still behind industry titan Schlumberger -- and giving it economies of scale. It would also (hopefully) boost the company's overall bottom line, perhaps turning Immelt's folly into a win. 

But there was one big hitch in this plan: regulators. Because both GE and Baker Hughes have big international footprints, a number of regulatory agencies -- most notably in the U.S., the EU, and Australia -- would have to sign off on the deal. And some analysts weren't sure that would happen.

GE for the win

Much of that skepticism was due to the unsuccessful track record of major mergers in this space. In 2016, regulators quashed a proposed marriage between Halliburton and Baker Hughes. The negotiations had been dragging on for more than a year, with regulators demanding more and more concessions, until eventually Halliburton pulled the plug, leaving it with nothing to show for its trouble save the $3.5 billion breakup fee it had to pay to its smaller rival.

But on May 31, the EU approved GE's purchase of Baker Hughes without conditions. In a statement, the regulatory body concluded that even though both companies were actively selling equipment such as electrical submersible pumps and drilling sensors in Europe, competition would not be adversely affected.

Then, on June 12, the U.S. Justice Department also gave the green light to the acquisition, on the condition that GE sell its GE Water business, which overlaps some key areas of Baker Hughes' operations. GE has already agreed to sell that unit to French wastewater treatment company Suez. 

One day later, the Australian Competition and Consumer Commission likewise announced it would not oppose the merger, due primarily to the GE Water sale. GE Water and Baker Hughes are both key suppliers of water treatment chemicals in Australia, but the ACCC recognized that the sale would remove any anticompetitive concerns in that area. 

Why it's important

With regulators from the EU, the U.S., and Australia on board, the deal is very likely to go through. Brazil gave its approval to the merger in early April, which means that the regulatory bodies in all major countries in which the companies operate are on board. 

If regulators had quashed the deal, or required so many concessions that GE was forced to abandon it, it would have been a big blow to GE's attempts to turn around its oil and gas business. GE Oil & Gas would likely have continued to drag on the company's finances as weak oil prices persist. Not to mention, GE would have been on the hook to pay Baker Hughes a $1.3 billion breakup fee. Baker Hughes, for its part, would remain stuck in a distant third place behind oilfield services rivals Halliburton and Schlumberger, a situation that has limited its pricing power and market clout. 

The deal is expected to be finalized shortly. 

Investor takeaway

Whether you're an investor who wants to see GE get stronger in its current form or one who thinks the conglomerate should be broken up, you should be in favor of this deal. A stronger oil and gas business with greater market share and more pricing power strengthens the company's bottom line. It also would become a more valuable stand-alone company, should new CEO Flannery decide to spin it off or break things up. Combining operations with Baker Hughes also means that instead of acquiring more oil and gas assets piecemeal, GE will be able to focus on strategic acquisitions in other areas that benefit its operations, like its emerging additive manufacturing and digital services businesses. 

This result strengthens the buy thesis for the company, and should be welcome news for GE shareholders.

John Bromels has no position in any stocks mentioned. The Motley Fool owns shares of General Electric. The Motley Fool has a disclosure policy.