Halliburton-Baker Hughes?

World’s second- and third-biggest oil services companies reach agreement, barring antitrust.

Halliburton has agreed to take over Baker Hughes for between $35bn-38bn, the Financial Times report. The deal is not yet final: it is subject to antitrust oversight by regulators in the US and elsewhere, who may oppose the merging of the second- and third-largest oil services companies in the world. The pairing of the two companies could put the resultant group in possession of more than 40% market share in some areas.

The notion of a takeover of Baker Hughes by Halliburton has been a recent one, with the companies opening talks only a month or so ago. Late last week, Halliburton submitted to Baker Hughes a list of nominees to the latter’s board when talks appeared to have broken down in what some have taken as a potential attempt at a hostile takeover. Since then a more peaceful deal has been brokered, and is pending regulatory approval.
The new company would be a strong one, possibly able to challenge Schlumberger, the current market leader in the oil services field by some margin. But there still remains the troublesome notion that the combined company would be a large one. In an attempt to ward off antitrust regulators, Halliburton has said it will seek buyers for $7.5bn-worth of businesses the company owns in order to lesser its dominance. Certainly, approval will be key for Halliburton: if regulators turn down the deal, it will have to pay $3.5bn in breakup costs, much higher than the industry standard.
To date, the mooted takeover has been welcomed: James Crandell of Cowen & Company, an analyst, told The New York Times that “I think it’s kind of obvious this is a great deal.” Morgan Stanley said the merger “makes sense” and is, as a result, “rare”.
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