The two Houston companies are key components of the USA energy-exploration business.
Advertisement
Goldman Sachs advised Baker Hughes, while Credit Suisse was lead financial adviser to Halliburton.
Baker Hughes Inc. said it would use the $3.5 billion break up fee it will receive from Halliburton Co. after their merger was scrapped to buy back $1.5 billion worth of its stock and repay $1 billion in debt. I also want to thank the entire Baker Hughes team for their unwavering dedication and commitment during this process.
Baker Hughes has faced employee turnover and cutbacks ever since Halliburton announced plans 18 months ago to buy it in a deal first valued at $35 billion.
Shares of Baker Hughes have fallen 25 percent since the merger deal was announced in November 2014. Because of their size, regulators in the US and overseas viewed their combination with suspicion.
“This is a much tougher market”, he told the WSJ.
Critics of megamergers applauded. The company’s shareholders stand to benefit from the Justice Department’s break up of this merger.
There will be very little ability for fracking providers to force the sale of other associated services, known in the industry as bundling, over the next two to three years, Craighead said.
(NYSE: NOV), General Electric Company (NYSE: GE) and a number of integrated oil majors could be interested in acquiring Baker Hughes. You can read about the merger agreement in our series titled Analysis of the Baker Hughes and Halliburton Transaction.
Martin Craighead, chairman and chief executive officer of Baker Hughes, said in a news release, “This was an extremely complex, global transaction and, ultimately, a solution could not be found to satisfy the antitrust concerns of regulators, both in the United States and overseas”.
Halliburton and Baker Hughes have called off their $28bn merger that faced stiff resistance from regulators in the USA and Europe over antitrust concerns.
Marietta said both companies probably suffered lost market share internationally while they were distracted by the failed transaction.
“The initial thought was that divestitures from the deal would shape the profile of the industry with many players waiting to see how the process would shake out”, Deutsche Bank analyst Mike Urban said Monday in a note to investors.
The company will source the funds for these initiatives from the break-up fee of $3.5 billion that it got from Halliburton when the deal was abandoned. In a “good remedy”, companies will agree to sell off entire business units, complete with management, facilities and sales forces, but Halliburton proposed to “take a couple of assets from here, a couple of assets from there”. Revenues of $4.19 billion were also slightly above the analysts’ estimate of $4.17 billion, but were down from $7.05 billion in last year’s comparable period.
Martin Craighead, CEO of Baker Hughe, said the outcome was disappointing. After all, No. 1 Schlumberger recently made a $12.7 billion acquisition of equipment maker Cameron International.
Advertisement
Across the Atlantic, the European Commission in January had opened a probe into the proposed merger, citing concern it would increase oil and gas exploration costs resulting in higher energy prices in Europe.
