Halliburton buys Baker Hughes

$35 billion cash and paper deal creates oil services behemoth with $50 billion revenues. Antitrust considerations may force divestments.

Megamerger sees Halliburton and Baker Hughes combine in paper and cash transaction valued at $34.6 billion, putting a $78.62 per share valuation of BHI at the time of the deal. While the release speaks of ‘highly complementary’ products and services, it envisages some $2 billion in ‘annual cost synergies’ for the combined company whose notional 2013 revenues were $51.8 billion. The new company will have 136,000 employees and operations in 80 countries.

The transaction represented a 40% premium on the BHI stock price just prior to the initial offer. Baker’s share popped from $52 to $66 on the announcement before dropping back to $57. At the time of writing, Halliburton is down from $54 to $40 following a longer term trend. Halliburton has agreed to divest businesses generating up to $7.5 billion in revenues, if required by regulators, although it is thought that these will be significantly less. Halliburton will pay BHI $3.5 billion if the deal fails to get antitrust approvals. The transaction is expected to close in the second half of 2015.

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