Halliburton to take over Baker Hughes

HOUSTON, November 17, 2014 – Halliburton on Monday announced its intention to purchase rival oilfield services company Baker Hughes for $34.6 billion in cash and stock. The deal comes on the back of falling oil prices, down by around one-third since June and now trading at some $75. This has necessitated increased resilience in the face of a lacklustre demand for services such as drilling.

 

Halliburton has stated its intention to divest as much as $7.5 billion in assets to ease antitrust concerns. According to initial reports in the media, there are at least seven overlapping business lines. Industry insiders expect the new entity to let go off at least three of those. On Tuesday, people close to the deal told Bloomberg Businessweek that Halliburton expects to sell only half of the $7.5 billion in assets it is committed to divest.

While the tie-up of the second- and third-biggest oilfield services companies in the world will create an entity that eclipses market leader Schlumberger in terms of revenue, it will take a backseat in terms of market capitalisation.

Upon the deal, energy analysts are expected to turn their attention to the Gulf of Mexico, where exploration companies rely heavily on the mentioned oilfield services companies. Increased pricing power on the part of the new entity could potentially put pressure on oil producers in that region.

Read our latest insights on:

• Mexico