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Halliburton Co., the world's second-biggest provider of oilfield services, agreed to buy No. 3 Baker Hughes Inc. (BHI) in the largest takeover of a U.S. energy company in three years.
Baker Hughes shareholders will receive 1.12 Halliburton shares plus $19 in cash for each share they own, the companies said in a joint statement. Halliburton plans to finance the deal through a combination of cash on hand and debt financing.
Halliburton eliminates one of its chief rivals in the merger, expanding its business portfolio and global reach at a time when falling oil prices have plunged the industry into a downturn. The combined company will be a little more than half the size of larger rival Schlumberger Ltd.
The deal is expected to draw federal antitrust scrutiny, especially where the two companies' businesses overlap most in North America. Halliburton said while it has agreed to sell businesses that generate as much as $7.5 billion in sales, it expects the amount required by regulators should be significantly less.
The combined company is expected to generate annual cost savings of almost $2 billion, according to the statement. With Baker Hughes, Halliburton fills a gap in its portfolio of oilfield services: technology to boost production in aging wells. Halliburton also gets Baker Hughes' prized oil tools business.
Fracking Market
Both companies are hired by oil and natural gas explorers to drill wells and provide services, such as hydraulic fracturing, or fracking, which cracks rock to let petroleum flow more freely. Together, the companies will dominate the $25 billion U.S. market for onshore fracking.
An area of scrutiny for regulators will probably be offshore drilling services in the Gulf of Mexico. Deep-water operators like Petroleo Brasileiro SA, known as Petrobras, mainly rely on the "big three" -- Halliburton, Baker Hughes, and Schlumberger.
Keywords: Hydraulic Fracturing, Fracking, Oilfield Services, Energy Company, Oil Tools, Offshore Drilling, ARC Advisory Group.