Halliburton will buy Baker Hughes for about $35 billion in cash and stock, creating an oilfield services behemoth to take on market leader Schlumberger as customers begin to cut spending due to falling oil prices.
Nov 17 (Reuters) - Halliburton Co will buy Baker Hughes Inc for about $35 billion in cash and stock, creating an oilfield services behemoth to take on market leader Schlumberger as customers begin to cut spending due to falling oil prices.
Halliburton expressed confidence that the deal would clear regulatory hurdles, but Baker Hughes shares were trading well below the offer, suggesting that investors were not so sure.
Halliburton also said it was ready to divest businesses that generate revenue of $7.5 billion to satisfy regulators and would pay Baker Hughes $3.5 billion if the deal was not cleared.
"At the end of the day, we wouldn't have done this deal if we didn't believe it was achievable from a regulatory standpoint," Halliburton Chief Executive Dave Lesar said on a conference call.
The deal, the second biggest in the U.S. energy sector this year, would create a company that dominates the North American market for hydraulic fracturing.
While there are at least seven major services where there is an overlap between the two companies, the deal would fill gaps in two product lines in Halliburton's portfolio - product chemicals and pumps that boost output from oil and gas wells.
Baker Hughes shares were trading at $65.40 just after the opening on Monday, well short of Halliburton's offer of $80.69, which was based on Friday's close.
Halliburton shares were down 8.5 percent at $50.34. Schlumberger was up 0.3 percent at $95.60.
Talks between the two companies started over a month ago and came to a head on Friday when Halliburton threatened to replace Baker Hughes's board after its initial offer was rejected.
Baker Hughes shareholders will get 1.12 Halliburton shares plus $19 in cash for every share held, and own 36 percent of the combined company.
Baker Hughes will get three seats on the combined company's 15-member board.
The combined company's 2013 revenue was $51.8 billion on a pro-forma basis, more than Schlumberger's $45.3 billion.
Credit Suisse and BofA Merrill Lynch advised Halliburton and Goldman, Sachs & Co advised Baker Hughes.
Law firms Baker Botts LLP and Wachtell, Lipton, Rosen & Katz worked with Halliburton, while Davis Polk & Wardwell LLP and Wilmer Cutler Pickering Hale and Dorr LLP advised Baker Hughes.
(Additional reporting by Kanika Sikka in Bangalore; Editing by Savio D'Souza)
Copyright 2016 Thomson Reuters. Click for Restrictions.
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