Halliburton Presses on With M&A Bond Deal Amid Regulatory Doubts

(Bloomberg) -- Halliburton Co. is plowing ahead with plans to sell $7.5 billion in bonds to finance its $34.6 billion takeover of Baker Hughes Inc., shrugging off concerns that the deal faces regulatory hurdles.

The oilfield services provider may sell the debt in as many as five parts Thursday, according to a person with knowledge of the matter. The offering comes a day after an analyst at Jefferies LLC cut the probability of Halliburton completing the takeover to 67 percent from 85 percent due to antitrust concerns.

A lot of big takeovers receive regulatory scrutiny but companies typically go ahead with debt issuance to get close to finalizing the deal, according to Matthew Duch, lead portfolio manager at Calvert Investments Inc. The offering has been "well- telegraphed" and investors probably have solid interest in buying the bonds, Duch said.

"I think they’re pricing it pretty snug," said Duch.

The longest portion of the offering will be $2 billion, 30- year bond that may yield 2 percentage points more than similar- maturity Treasuries, said the person, who asked not to be identified because the information isn’t public. That’s down from an initial offered spread of as much as 2.4 percentage points.

A $2 billion, 10-year portion may yield 1.6 percentage points more than government debt, down from as much as 1.95 percentage points.

Duch said he was expecting the yield-spread for the 10-year debt to be close to 2 percentage points and considers 1.95 percentage points to be closer to fair value.

Attractive Deal

"They are highly rated and a mega-deal, both of which make them attractive in this environment," said Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, which manages $61 billion in assets.

Emily Mir, a Halliburton spokeswoman, didn’t immediately respond to messages seeking comment.

Halliburton is facing increasingly long odds of completing the acquisition and the gap between the per-share value of its offer and Baker Hughes’ stock price widened to 22 percent on Wednesday. That’s the second-largest differential since the deal was announced on Nov. 17 last year. The company has already pushed back the timeline for closing the merger amid scrutiny from regulators in the U.S. and Australia.

Messy Close

“If regulators resist, it could make for a messy close,” Brad Handler, an analyst at Jefferies, wrote Wednesday in a report. He said that there’s “some chance it is blocked.”

The world’s second- and third-largest oilfield service companies have been seeking to complete the deal by either Dec. 15, or 30 days after both certify compliance with U.S. Justice Department requests, whichever is later.

Halliburton has $8.6 billion in bridge loan commitments to partially pay for its acquisition of Baker Hughes. Bridge borrowings are typically replaced by bonds. Halliburton and Baker Hughes in September flagged the sale of additional business units in an effort to satisfy antitrust concerns over the takeover.

--With assistance from David Wilson in New York.

To contact the reporters on this story: Allison McNeely in Toronto at amcneely@bloomberg.net; Cordell Eddings in New York at ceddings@bloomberg.net To contact the editors responsible for this story: Nabila Ahmed at nahmed54@bloomberg.net Faris Khan, Eric J. Weiner.


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