Baker Hughes (BHI) to be Acquired by Halliburton in $34.6B Deal

Shares of Baker Hughes Inc. (BHI) were trading up +9.26 or +15.46 percent to $69.15 per share in Monday's premarket, after news that Halliburton (HAL) would be buying the company for a combination of stock and cash in a deal worth approximately $34.6 billion. Baker Hughes stock closed at $59.89, up +1.14 or +1.94 percent in Friday's regular trading session.

Halliburton stock was down -2.11 or -3.83 percent to $52.97 in this morning's premarket.

Houston, Texas based Baker Hughes Inc. is a combination of two innovative oil services companies: The Hughes Tool Company and Baker International, which merged in 1987. The company is one of the world's largest oilfield services providers, operating in more than 90 countries. Baker Hughes provides the oil and gas industries with drilling, production, formation evaluation and reservoir consulting services. The company had net income of $1.1 billion on revenue of $22.3 billion in 2013.

Founded in 1919, the Halliburton Company dually based in Houston and Dubai, is another of the world's largest oil field service companies, with operations in over 80 countries through a myriad of subsidiaries, branches and affiliates. The company employs over 100,000 people and had total assets of $29.2 billion last year.

The agreement, announced early this morning, will have Halliburton pay with 1.12 of its shares and $19 in cash for each share of Baker Hughes. The approximate value of the deal comes to $78.62 as of the November 12th date that news of the merger talks were originally made public.

The two companies began talks in October but a disagreement arose when Halliburton refused to raise their bid or agree to a termination fee in the event that regulators might block the acquisition. On Friday, Baker Hughes announced that Halliburton had submitted a list of nominees to Baker's board as talks appeared to have broken down.

Nevertheless, Halliburton agreed to divest businesses generating as much as $7.5 billion in revenue to meet anti-trust regulatory requirements. The company also agreed to pay a $3.5 billion breakup fee if the deal fails to meet the required approvals.

Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes stated that, "This brings our stockholders a significant premium and the opportunity to own a meaningful share in a larger, more competitive global company. By combining two great companies that have delivered cutting-edge solutions to customers in the worldwide oil and gas industry for more than a century, we will create a new world of opportunities to advance the development of technologies for our customers. We envision a combined company capable of achieving opportunities that neither company would have realized as well or as quickly on its own, all while creating exciting new opportunities for employees."

Dave Lesar, Chairman and Chief Executive Officer of Halliburton said "We are pleased to announce this combination with Baker Hughes, which will create a bellwether global oilfield services company and offer compelling benefits for the stockholders, customers and other stakeholders of Baker Hughes and Halliburton. 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."

Baker Hughes stock is +14 percent higher this morning, but still about $10 short of the $78 deal price, which indicates the stock could be in play while the deal is approved by regulators. The transaction is expected to close by the second half of 2015.

Other News About Bakers Hughes
Baker Hughes Lifer Defends His Firm
Martin Craighead discusses Halliburton bid.
Oil services groups prepare for upheaval
FT article about the effects the Halliburton-Baker deal will have on other industry participants.

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Published on Nov 17, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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