Halliburton To Acquire Baker Hughes In $38 Bln Deal

(RTTNews) - Oilfield services provider Halliburton Co. (HAL) agreed Monday to acquire smaller peer Baker Hughes, Inc. (BHI) in a cash and stock deal valued at $78.62 per Baker Hughes share or a total of $34.6 billion. The deal, which represents an enterprise value of $38 billion, will create a bellwether global oilfield services company.

Following the announcement of the deal, Baker Hughes shares are soaring nearly 16 percent in pre-market trading, while Halliburton shares are down nearly four percent. "The transaction will combine the companies' product and service capabilities to deliver an unsurpassed depth and breadth of solutions to our customers, creating a Houston-based global oilfield services champion, manufacturing and exporting technologies, and creating jobs and serving customers around the globe," Halliburton Chairman and CEO Dave Lesar said.

The deal will see Baker Hughes shareholders receive a fixed ration of 1.12 Halliburton shares plus $19.00 in cash for each share they own. The offer is valued at $78.62 per share, based on Halliburton's closing price of $53.23 on November 12, the day prior to public confirmation by Baker Hughes that it was in talks with Halliburton.

The offer price also represents a strong 54.2 percent premium over Baker Hughes' closing price of $50.98 on November 12 and a premium of 40.8 percent over Baker Hughes' unaffected closing price of $56.68 on October 10, the day prior to Halliburton's initial offer.

The deal is expected to add to Halliburton's cash flow by the end of the first year after closing and to earnings per share by the end of the second year. The deal will also generate nearly $2 billion in annual synergies and significant cash flow to support future returns of capital to stockholders.

Halliburton said it intends to fund the cash portion of the deal through a combination of cash on hand and fully committed debt financing.

The deal, unanimously approved by the boards of directors of both companies, is expected to close in the second half of 2015. The closure deal is primarily subject to approvals from each company's stockholders and regulatory approvals.

Following the closure of the deal, Baker Hughes stockholders will own about 36 percent of the combined company, which will maintain the Halliburton name in Houston, Texas and continue to be traded on the NYSE under the ticker symbol 'HAL.'

The combined company's board is expected to be expanded to 15 members, with three persons being added from the Board of Baker Hughes. Meanwhile, Halliburton has withdrawn its slate of directors nominated for the Board of Directors of Baker Hughes.

On Friday, Halliburton had gone hostile with its offer by sending notice to nominate a full slate of directors to replace the entire board of Baker Hughes at its April 2015 annual meeting.

Halliburton is the world's second-largest oil services company with a current market capitalization of about $47 billion, while Baker Hughes, the third-largest, has a market capitalization of $26 billion following the surge related to the news. However, the combined entity will still be much smaller than the world's largest oilfield services company Schlumberger Ltd. (SLB), which has a market cap of $122 billion.

The two companies will also together have presence in more than 80 countries and the combined company, on a pro-forma basis, had 2013 revenues of $51.8 billion. To get regulatory approval, Halliburton would have to sell a number of assets across a range of business lines.

Halliburton said it is committed to complete the deal and has agreed to divest businesses that generate up to $7.5 billion in revenues, if required by regulators, although Halliburton believes that the divestitures required will be significantly less.

Halliburton has also agreed to pay a fee of $3.5 billion if the transaction terminates due to a failure to obtain required antitrust approvals.

HAL closed Friday's regular trading session at $55.08, up $1.29 or 2.40% on a volume of 25.50 million shares, and BHI closed at $59.89, up $1.14 or 1.94% on a volume of 43.90 million shares.