On Monday, GE and Baker Hughes announced they would form a new company to be controlled by GE, with the industrial giant paying the shareholders in the services firm a one-time cash dividend of $17.50 a share.
"I think it's a great deal," said the CEO and founding partner of Trian Fund Management, which invested $2.5 billion in GE a year ago.
"For the first time they can now go nose to nose with Schlumberger," Peltz told CNBC, referring to the world's largest provider of services to independent drillers and integrated oil companies.
Peltz also trumpeted the tax advantages the deal affords GE and said it gives the company "optionality and a currency."
"Trian congratulates GE on its decision to combine its Oil and Gas assets with Baker Hughes," Trian said in a statement. "Trian believes the combination has strong industrial logic, combining complementary businesses to create a best-in-class company in the Oil and Gas industry with significant competitive strengths."
The firm added: "Trian also applauds GE for structuring an attractive transaction that should crystallize a superior valuation multiple for GE's Oil and Gas assets."
— CNBC's Scott Wapner contributed to this report.