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The Oil Rout's First Megadeal: Baker Hughes Folds, Sells To Halliburton For $35 Billion
While it was already leaked in the past week that oil service giant Halliburton would seek to purchase Baker Hughes, or, if the smaller oilservice company did not accept the proposed terms, make a hostile run at its board of directors, it was unclear how the Houston company would respond. As the Houston Chronicle summarized, BHI had "to make a tough choice: surrender control on a rival's terms or face months of sunken oil prices and cost pressures alone....Halliburton's demands come as crude prices have fallen dramatically and as the U.S. oil industry looks to an uncertain future. Much is unclear: how much oil producers will rein in equipment and service spending, whether oil prices will sink or swim, and how much Baker Hughes would be worth in six months after what would likely be a bruising battle for control of its board." Moments ago we got the answer and Baker Hughes shareholders decided they have had enough of the volatile oil price and are happy to cash out at this point, in a $34.6 billion deal that values BHI shares at $78.62/share.
Then again, judging by the rather substantial M&A arb currently in the price, which was trading at $70.35 pre market, or a 10%+ discount to the proposed price, arbs seem to be a little sceptical if the $3.5 billion termination fee will not be put into play.
Also of note: $2 billion in "synergies" means a whole lot more BLS unemployment "seasonal adjustments" will be used in the coming months.
Full release below:
Halliburton and Baker Hughes Reach Agreement to Combine in Stock and Cash Transaction Valued at $34.6 Billion
- Baker Hughes Stockholders to Receive 1.12 Halliburton Shares Plus $19.00 in Cash for Each Share They Own
- Transaction Values Baker Hughes at $78.62 per Share as of November 12, 2014
- Highly Complementary Product Lines, Global Presence and Cutting-Edge Technologies Will enable Combined Company to Create Added Value for Customers
- Accretive to Halliburton Cash Flow by the End of Year One, with Nearly $2 Billion in Synergies and Significant Cash Flow to Support Future Returns of Capital to Stockholders
Halliburton Company (HAL) and Baker Hughes Incorporated (BHI) today announced a definitive agreement under which Halliburton will acquire all the outstanding shares of Baker Hughes in a stock and cash transaction. The transaction is valued at $78.62 per Baker Hughes share, representing an equity value of $34.6 billion and enterprise value of $38.0 billion, based on Halliburton’s closing price on November 12, 2014, the day prior to public confirmation by Baker Hughes that it was in talks with Halliburton regarding a transaction. Upon the completion of the transaction, Baker Hughes stockholders will own approximately 36 percent of the combined company. The agreement has been unanimously approved by both companies’ Boards of Directors.
The transaction combines two highly complementary suites of products and services into a comprehensive offering to oil and natural gas customers. On a pro-forma basis the combined company had 2013 revenues of $51.8 billion, more than 136,000 employees and operations in more than 80 countries around the world.
“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,” said Dave Lesar, Chairman and Chief Executive Officer of 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.”
Lesar continued, “The stockholders of Baker Hughes will immediately receive a substantial premium and have the opportunity to participate in the significant upside potential of the combined company. Our stockholders know our management team and know we live up to our commitments. We know how to create value, how to execute, and how to integrate in order to make this combination successful. We expect the combination to yield annual cost synergies of nearly $2 billion. As such, we expect that the acquisition will be accretive to Halliburton’s cash flow by the end of the first year after closing and to earnings per share by the end of the second year. We anticipate that the combined company will also generate significant free cash flow, allowing for the return of substantial capital to stockholders.”
Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes said, “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.”
Lesar concluded, “We believe that the expertise of both companies’ employees and leaders will be a competitive advantage for the combined company. Together with the people of Baker Hughes, we will establish a team to develop a detailed and thoughtful integration plan to make the post-closing transition as seamless, efficient and productive as possible. We look forward to welcoming the talented employees of Baker Hughes and are pleased they will be joining the Halliburton team.”
Transaction Terms and Approvals
Under the terms of the agreement, stockholders of Baker Hughes will receive, for each Baker Hughes share, a fixed exchange ratio of 1.12 Halliburton shares plus $19.00 in cash. The value of the merger consideration as of November 12, 2014 represents 8.1 times current consensus 2014 EBITDA estimates and 7.2 times current consensus 2015 EBITDA estimates. The transaction value represents a premium of 40.8 percent to the stock price of Baker Hughes on October 10, 2014, the day prior to Halliburton's initial offer to Baker Hughes. And over longer time periods, based on the consideration, this represents a one year, three year and five year premium of 36.3 percent, 34.5 percent, and 25.9 percent, respectively.
Halliburton intends to finance the cash portion of the acquisition through a combination of cash on hand and fully committed debt financing.
The transaction is subject to approvals from each company’s stockholders, regulatory approvals and customary closing conditions. Halliburton’s and Baker Hughes’ internationally recognized advisors have evaluated the likely actions needed to obtain regulatory approval, and Halliburton and Baker Hughes are committed to completing this combination. Halliburton has agreed to divest businesses that generate up to $7.5 billion in revenues, if required by regulators, although Halliburton believes that the divestitures required will be significantly less. Halliburton has agreed to pay a fee of $3.5 billion if the transaction terminates due to a failure to obtain required antitrust approvals. Halliburton is confident that a combination is achievable from a regulatory standpoint.
The transaction is expected to close in the second half of 2015.
Then again, in a time when busted M&A has caused even more pain for the hedge fund community (read Scuttled deals worth $580 billion put hedge funds on back foot: "Hedge fund manager John Paulson, who invested 1.44 billion pounds in Shire on Oct. 14, saw his Advantage fund lose 13.6 percent in October, according to an investor, while Elliott Associates said it may take legal action against AbbVie for scuttling the deal and losses"), the last thing the M&A arb community needs is yet another red herring deal, which may well be seeking to force shorts across the oilspace shorts to scramble to cover, to fall apart and lead to even more hedge fund pain with less than 2 months left until year end.
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Only 35 Billion ?
Dickey Cheney scores another illicit deal.
We call them Halibortion and Baker Jews here in Alberta
HAL down 6% at $51.00. I'm just glad they aren't in computers.
Halliburton bought at the top.
Yes, the heading for the exits and finding of a bigger fool to hold the steaming sack of excrement has begun in earnest now. With oil prices what they are the shale oil shell game of musical chairs and rampant speculation/venture funding inflows is starting to wind down....it only barely made sense with oil over $100, and simply costs too much to keep going.
This is now spilling over into the smaller servicing outfits, who are finding their margins squeezed too thin.
Publicus,
I think you are right. I am sitting here, nursing coffee, trying to find any way possible (conspiracy theories acceptable!) to make this deal look like a good one.
The only winners I see here are Baker Hughes shareholders ... which sold out at the top.
I wonder if this will be as epic as Yahoo's fuck up when Mark Cuban took 'em to thee woodshed...
Regards,
Cooter
Bought at $29 year ago, sold at $75 this year.
Ahhh, now we see the corruption inherent in the system!
So....is there hope for my Enron stock still?
It's price has been very stable for years now. Dead is very stable.
$97
http://www.marketwatch.com/investing/stock/eog
What the strapline might have been: CIA & Shadow Government economic warfare on Ruble & Oil yields cheap pickings for Parastatal supported shadow Government Cheney (33 degree Mason) entity.. Elite Corpotocracy & Government Policy marches on.
Spot-fucking-on. "Parastatal", I'm gonna use that one.
Are you sure is not Parastas
(A memorial service is a liturgical solemn service for the repose of departed in the Eastern Orthodox Church.)
http://en.wikipedia.org/wiki/Memorial_service_(Orthodox)
..
I can't be the only one who throws up a bit every time Halliburton is mentioned in a sentence.
There are at least 172 people on board the Carnival Crown Princess who threw up, too:
http://news.yahoo.com/170-people-fall-ill-carnival-cruise-california-201...
Maybe they heard the news?
Maybe Anita Bryant was the entertainment
Why do people still go on cruises? It's a tell for where society is at.
As for the entertainment it might even have been "Lorde"...ugh....
That said, Dick Dock, Dick Dock....we are going to see a lot of forced M&A due to the shattered (hyperbole FTW) commodity complex, the base-lessly bouyant stock market and dollar and the general downtrend in the world.
And of course, just because, WAR!
Hey, Lorde's music isn't so bad (when it's sung by a giant opera clown and performed by actual musicians).
https://www.youtube.com/watch?v=VBmCJEehYtU
William Jefferson Clinton's no-bid oil company bother you that much?
Given time, all these takeovers, mergers and acquisitions will probably culminate in just one corporation owning everthing in Americ?. This is not an exageration. The signs are already there.
The cult is not going to appreciate you saying that.
And when one corporation comes to own everything, it will begin share buybacks until all shares are bought back, which will then leave just the devil owning everything.
At which point you'll be given a choice to be either a republican or a democrat.
So Saudi Arabia - and Haliburton being one of the key beneficiaries of U.S. entaglement in the Middle East - wouldn't have anything to do with this of course.
All angles lead back to the same people, the same pockets, the same agenda.
Well not all, give me a one degree slice and you manage the 359.
Thats why its called American style "communism", the style that made Rockafella and Morgan kings of the world. Its called manifest and unclonable exceptionalism of skull n bones vintage that would make Putin's KGB pedigree look like tap water to Bourbon in comparison.
Wonder why the people of the USA like to complain about those who try and level the playing field between these American elites (protected by their MIC gun toting hit men; the Monopoly capitalists who now OWN the world, more communist than Stalin himself ; neo-con scions of that awesome movie "Dr Strangelove"-- cherishing their precious bodily fluids like it were the sole essence of global hereditory exceptionalism that is their natural birth right-- AND, those others "statists and socialists", half-breeds and slave spawned, typical melting pot deniers, who created Glass-Steagall and State corporations like TVA, which are NOT OWNED by those American blue blooded "commies".
The latter all formed in the ivy league universe and all siliconed like a bunch of Yahoo class dolls recruited from its upper crust clonage factory of Stanford or equivalent.
Aldous Huxley would be proud of that Thatchery that proved him more than right.
Thats why he died the day he did! "I'm a getting outa here fast! Before I become toast in Daly Plaza Dallas."
Now why is there this contradiction between the American Dream, its elitist language where the words bandied mean the opposite of their historical definition and the irrepressible belief in Fu Man Chu's invisible hand of Confucian markets.
I am confused, not being a Confucian nor a "true blue" American.
If one drops the price, the other has to pay the bills or develope a race to end the compitition between the two, they elected to cash out now rather than head to the fight club.
Halliburton are taking over Baker's operation in Nigeria but will have to fork out the New Terms & Conditions if they wanna last.
it was sold to another club member, just to give us the illuison
Well that was fast. Pretty delicate business model.
re we still hanging onto the belief that
printing money causes inflation
I wish ZH and all their hired guns would revize the storyline
and describe deflation as an independant big bear.
Also forget peak oil.
Godspeed to the employees of Baker & Hughes. How long until there are two big oil companies just like with cell phone service? It's amazing the things that corpse Cheney can pull off.
HAL and BHI are not Oil companies. They are service companies. CITGO, Shell, Chevron, these are oil companies.
Maybe Hunter can jump ship as papa only has a short time period to rake in the retirement income. With Ukraine on the rack Hunter can take over Baker Hughes operations in Nigeria. None of Putin's rascally bandits to worry about only Ebola, Boko Harem Scarem and a restless citizenry due to the attack on crude prices.
Long live Dick Cheney !!.....No really he is still alive.
Halliburton = Evil
I was offered their stock couple of years ago when the shale boom started, I declined, having just seen an eye-opening documentary Iraq for Sale...
https://www.youtube.com/watch?v=E_Ie1cdTHlU
Podcast with artist to have only 9/11 Truth art in official museum
Infotrap: Anthony Freda’s 9/11 Truth art accepted in official museum, remixes Kim Kardashian pic
Off topic, but I've been too lazy to get/look into AdBlocker Plus for fear of screwing up my computer, but Jesus Jenny ZH these ads are just getting fucking ridiculous. Either that or you're gonna lose a loyal reader.
Oh and if there's enough comments in a thread where the thread goes far enough to the right, that Sponsored Financial Content bullshit covers up some of the comments and you can't read them. Another bunch of crap.
Please do something about it.
I can read ZH on my computer but not on my phone because the screen is 100% covered with SFC. Okay, it usually takes about a minute before it appears but it covers the whole screen.
On the plus side, I spend waaaaaaayy too much time here so its good to be forced away from it.
;)
If you are on an actual desktop PC, don't use Internet Explorer (IE). Use FireFox (FF). If you have firefox, go to "Add ons", then choose "Extensions" on the left. This window has a built in search of ad ons publishes via FF's website, so put "AdBlock Plus" in the upper right search box search.
Mine shows version 2.6.6.
I had an older cell phone and the ads were miserable. When I got my new BlackBerry Z30, most of that went away.
If you are stuck with a crappy cell phone, ads are served semi-randomly, so sometimes just reloading the screen and getting a less obnoxious ad will help.
ZH needs ads to keep the lights on and sometimes I think things are posted that probably involved a deposit to their operating accounts, but I can live with that.
Regards,
Cooter
blano +100
You shouldn't have this problem with Chrome. If you still do try Firefox. But IE is a disaster.
There was some jerk on here that kept claiming bigger fish would swallow the smaller ones, what an asshole. GO BIG RED!
Weatherford will get bought out soon too. Laid off hundreds here in Houston in '14
There was some jerk on here that kept claiming bigger fish would swallow the smaller ones, what an asshole. GO BIG RED!
The Cabal is consolidating its positions in the energy space.
Prepare to see the shale plays bankrupted and bought for ten cents on the dollar.
Then when Saudi terminates the petrodollar standard oil will blow through $100 to $150?
Then the Bakken will make money for Exxon (545k acres) Buffet and Evelyn.
This is the first of many consolidations in the process.
Evelyn consolidated ownership after the BP sabotage in the Gulf.
Its Evelyn's world. We just live in it.
And now they have enough know how to pick out the sweet spots which is a minority of acerage leased.
One of the problems with shale fracking is that many wells never produce much but cost the same as any other well, so it effects the averages. If companies could exclude 75% of the least productive wells BEFORE DRILLING, then shale might make it ASSUMING no debt going into that arrangement.
This would mean many less wells and less total output, but it would not bleed cash as badly as it is know.
Oh, and prices would have to stay high ...
Regards,
Cooter
Ding ding ding!
$2bn in annual cost synergies against $51bn in combined revenue. That's about 4%. AGGRESSIVE.
Start looking for a new job, BHI employees.
Now who saw that one coming?...
The Bush family, The "Dick" Cheney and an assorted 'melange' of putrid Israeli and Saudi bankers just got "more control"!....
I'll reserve the part about getting richer depending on what your definition of what that might look like at this point!
HAL divested KBR years ago.
And zh'ers get the vapors.
Oh boo hoo mean old Halliburton taking over the world.
Schlumberger has always been bigger and this is an attempt by HAL to compete directly with them.
Before merger, HAL had 80k employees worldwide. On it's own, SLB had 126k. This is a Mac vs Microsoft kind of deal.
Look for Weatherford to get bought out in the next year too, they laid off a shitton of people this year in Houston to cut cost.
OK SO MY QUESTION IS
how does the stock market value a company versus its "real" worth
or
have the HAL investors been hosed to benefit some BHI crony insider..??
and
if drilling is going to be cut way back.... why not wait for further market devaluation of BHI and get it even cheaper...
wtf??
C'mon Zero's ... go GREEN ENERGY and get away from Big OIL .... Hahahahaha the answer is right there !
Those MFer's have you cornered no matter where you move !
let it all burn
Oil Rout's second deal : Tanzania government sells pastures of Serengiti national park to Abu Dhabi royal family as their PRIVATE hunting grounds, displacing 40 000 Masai in the process.
Watch out for more beheadings of corrupt bureaucrats in Tanzania.
Halliburton, just another corporate scurge upon the planet.
Damn those oil services companies!
Uncle Dick arranges shitgum wedding... Nice