Halliburton mua lại Baker hughes

Halliburton Co. ’s plan to spend almost $35 billion to buy smaller oil-field services rival Baker Hughes Inc. underscores the new realities for energy companies in a world suddenly awash with oil.


The deal, announced Monday morning, has been in the works since mid-October, when gradually declining oil prices started dropping sharply. Slowing demand for oil and rising supply has pressured everyone from Saudi Arabia’s national oil company to tiny private drillers in North Dakota. As a result, oil-field services companies, which are hired to drill and pump wells, face less demand for their services and pressure to cut prices.


Without a merger and with U.S. oil prices around $75 a barrel, Halliburton and Baker Hughes “were going to have to shrink their workforce and react to lower client spending,” said Dan Pickering, co-president of investment bank Tudor Pickering Holt & Co. The companies said the merger would give them better depth and breadth while saving about $2 billion a year in costs.


To address possible antitrust concerns, Halliburton agreed to sell businesses that generate up to $7.5 billion in revenue. The company agreed to pay Baker Hughes $3.5 billion if the deal fails to clear antitrust review.




But antitrust experts said the merger could face resistance from regulators because it would leave the industry highly concentrated between two large companies: the merged Halliburton, as the new company would be named, and Schlumberger Ltd.


Going from three big competitors down to two is the kind of merger that is “going to be tough to get through anywhere,” said Steven Cernak of law firm Schiff Hardin.


Halliburton and Baker Hughes have several businesses in which they compete for customers, including computer-controlled horizontal drilling and hydraulic fracturing for oil and gas.


UBS Securities said the combined company would have about 37% of the fracking market, 48% of the market for equipment and services used to prepare wells for pumping, and 45% of the market of monitoring rocks while drilling. Since Schlumberger has 47% of that monitoring business—known as “logging while drilling”—the new Halliburton and Schlumberger essentially would have the market to themselves.


Diana Moss of the American Antitrust Institute, which favors vigorous antitrust enforcement, noted Halliburton’s and Baker Hughes’s overlapping businesses in the sale of drill bits, measuring underground conditions during drilling and well cementing and other services. If the deal goes through, the merged company and Schlumberger could have 70% to 90% of the market in some service areas, she said.


Halliburton and Baker Hughes also drill in many of the same regions, from U.S. shale-oil fields in Texas and North Dakota to the deep waters off Brazil. A map of the companies’ offices released by Halliburton shows overlap in North America, Europe, China, the Middle East and Latin America.


Given the companies’ international businesses, the pair likely will need to obtain antitrust clearance abroad. That process could play an important role in the deal’s fate since several countries have stepped up merger reviews in the last decade. China, one of the most important growth markets for drilling and fracking, can be particularly slow and unpredictable regarding antitrust enforcement.


“We clearly would not have done this deal if we didn’t believe it was achievable from a regulatory standpoint,” said Dave Lesar, Halliburton’s chairman and chief executive. “We are absolutely confident that we’re going to get this thing done.”


Kurt Hallead at RBC Capital Markets said national oil companies world-wide, such as Petroleo Brasiliero SA, are likely to respond by trying to foster competition, noting that at least three companies usually bid for big contracts. Such state-run oil companies might dole out contracts to small oil-field services providers to build them up and boost competition, he said.


The views of such customers will be critical to the U.S. Justice Department’s antitrust review, said Fiona Schaeffer of law firm Milbank, Tweed, Hadley & McCloy.


Another potential issue could be whether antitrust enforcers believe that buyers for any divested assets would adequately replace competition lost by the merger.


Schlumberger, Halliburton and Baker Hughes are known as the Big Three global oil-field services companies, providing everything from measuring the amount of oil in underground oil reservoirs to mixing the cement that keeps wells safe. With $45.27 billion in revenue last year, Schlumberger is far larger than its two Houston rivals. Halliburton took in $29.4 billion last year, while Baker Hughes’s revenue was $22.36 billion.


Combined, Halliburton and Baker Hughes had more than 136,000 employees and operations in more than 80 countries.


Layoffs are likely, said Doug Sheridan, whose EnergyPoint Research asks oil producers to rate oil-field services providers.


Following several contentious days of bargaining, Halliburton offered its competitor $34.6 billion in cash and stock. That is 47% more than Baker Hughes’s stock-market value on Wednesday, the day before The Wall Street Journal reported news of the potential tie-up. It would be the highest premium paid in any deal of at least $20 billion in the past decade, according to financial data firm Dealogic.


The premium is likely to scare off other potential bidders and sent Halliburton’s stock tumbling Monday. The company’s shares fell 11% to close at $49.23. Shares of Baker Hughes rose 8.9% to $65.23.


Baker Hughes traces its corporate roots to 1907, when Reuben C. Baker formed a company in the California oil fields to sell the drilling tools he invented.


Erle Halliburton founded his company in 1919, focusing on cementing, an important phase in drilling and finishing wells, in Oklahoma.