BHI/DC – And the soap opera continues!
NY Post: DoJ leaning against Halliburton-Baker Hughes deal
- Baker Hughes (NYSE:BHI) -2.2% premarket following a NY Post report that Halliburton (NYSE:HAL) is making a last-ditch bid to save their proposed merger but the Justice Department is leaning against it.
- The DoJ has not made a final decision on whether to file a lawsuit to block the deal, but it could announce its opposition as soon as this week's American Bar Association annual antitrust conference in Washington, according to the report.
- HAL is on the hook to pay a $3.5B break-up fee to BHI if the deal falls apart; BHI also could walk away from the deal at the end of April – and might do so – to collect the fee if the DoJ does not act by that time, the report says.
- Regulators reportedly have asked HAL to sell assets with ~$10B in revenue, which it is struggling to do after the collapse in oil prices; GE is said to be the only company willing to buy some of the assets, with Weatherford (NYSE:WFT) out of the bidding.
- Now read Halliburton and Baker Hughes: Is it time to cut losses?
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Given the nature of the concerns publicly stated by the regulators in the European Union, Australia and Brazil, the limited divestitures proposed by Halliburton are unlikely to be the answer to the issues. Moreover, limited additional divestiture would not provide the answer either. Therefore, chances of the proposed combination receiving the necessary approvals are low, in my opinion.
Even if approvals could be obtained, their cost – in the form of required majordivestitures – would defeat the purpose of the merger and would be too high for Halliburton to accept.
Another challenge is the ability to find buyers for the assets at reasonable prices which cannot be taken for granted in the current commodity price environment.
