Halliburton will buy Baker Hughes Inc. for
$34.6bn to create a combined Houston-based global oilfield
Both companies, which are leading producers and
providers of oilfield minerals including bentonite and barite
(barytes), entered into a definitive agreement in November
under which Halliburton will acquire all the outstanding shares
of Baker Hughes in a stock and cash transaction, valued at
$78.62 per Baker Hughes share.
"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 oilfield services champion,
manufacturing and exporting technologies, and creating jobs and
serving customers around the globe," Halliburton’s
CEO, Dave Lesar, said.
In 2013, Halliburton and Baker Hughes had a
combined revenue of $51.8bn with operations in more than 80
countries globally, and employing over 136,000 people.
According to the companies, the transaction will
combine two complimentary suits of products and services into a
comprehensive offering to oil and natural gas
Lesar predicts that the combination will yield
annual cost synergies of almost $2bn, contributing to earnings
per share by the end of the second year.
"We believe that the expertise of both
companies’ employees and leaders will be a
competitive advantage for the combined company," he added.
Martin Craighead, CEO of Baker Hughes, said: "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
He added that the agreement will let both
companies to achieve objectives which neither would have
realised on its own, or as well.
The combined company will operate under the name
of Halliburton and will be headquartered in Houston, Texas.
Lesar will continue as CEO of the joint company,
and the board of directors will expand to 15 members, three of
which will come from the Baker Hughes board.
Halliburton duel fuel technology for
On completing the transaction, Baker Hughes
stockholders will own approximately 36% of the combined
company, and both the Halliburton and Baker Hughes board of
directors have approved the agreement.
Baker Hughes stockholders will receive a fixed
exchange ratio of 1.12 Halliburton shares plus $19 in cash for
each Baker Hughes share.
The value of the merger consideration as of 12
November 2014 represents 8.1 times current consensus 2014
EBITDA* estimates and 7.2 times current consensus 2015 EBITDA
The transaction value represents a premium of
40.8% to the stock price of Baker Hughes on 10 October 2014,
the day prior to Halliburton’s initial offer to
The acquisition will be financed by Halliburton
through a combination of cash on hand and fully committed debt
financing, and is subject to stockholder and regulatory
Having pre-empted the actions likely to be needed
for regulatory approval, Halliburton has agreed to divest
businesses that generate up to $7.5bn in revenues and to pay a
fee of $3.5bn if the transaction terminates due to a failure to
obtain required antitrust approvals.
Oilfield demand strong
Both Baker Hughes and Halliburton posted positive
third quarter results in 2014 as demand from the oilfield
sector remained strong driven by drilling activity in the
Americas, which will in turn drive demand for oilfield minerals
such as silica (frac) sand, barite and bentonite.
Activity in the Eastern Hemisphere continued to
expand steadily according to Halliburton, which contributed to
a sequential growth in revenue of 4% and an increased in
operating earnings of 3%, driven by Saudi Arabia, Oman, Angola
and Continental Europe.
Increased project management, consulting and
software revenue in Mexico resulted in revenue growth of 16%
from Latin America. This was also buoyed by increased testing
and drilling activity in Brazil and workover and stimulation
activity in Venezuela.
The increase in Baker Hughes revenue was driven
partly by Latin America owing to increased activity in
Argentina and offshore Mexico. Revenue growth in North America
was driven by an increase in service intensity in the
company’s pressure pumping product line and the
seasonal rebound of its Canadian business.
However, disruptions in Libya and Iraq, the
declining Russian rouble and activity delays in the Gulf of
Mexico all negatively impacted the business, Baker Hughes
*Earnings before interest, taxes, debt and