GE is seeking to combine its own oil and gas business with the oilfield services provider, creating a new entity that would be controlled by GE, the WSJ reported on Sunday, citing anonymous sources.
In a statement last week, GE confirmed that it was discussing potential partnerships with Baker Hughes but ruled out an "outright purchase."
The new entity could yield more than $25 billion in revenue and allow GE to gain from an anticipated oil market recovery without paying for a full acquisition, the WSJ said.
Shares of both companies have so far cheered news of such a deal, with GE ending 2.1 percent higher on Friday, while Baker Hughes rallied 8.4 percent.
To read the full WSJ report, click here.