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Department of Justice given until November 25 to review Halliburton and Baker Hughes merger

Oilfield service giants Halliburton (ticker: HAL) and Baker Hughes (ticker: BHI) announced today that they have entered into a timing agreement with the Antitrust Division of the U.S. Department of Justice (DOJ) that will extend the review period for the companies’ $34.6 billion merger. The agreement gives the DOJ until November 25, 2015, or 90 days after both Halliburton and Baker Hughes have certified substantial compliance with the DOJ’s second review request, according to a HAL press release.

The two companies announced in November of last year that Halliburton planned to acquire Baker Hughes for a total consideration of $34.6 billion, or $78.62 per BHI share (40.8% premium). BHI shareholders are in line to receive 1.12 HAL shares and $19 in cash for each share of Baker Hughes, equating to a split of 76% stock and 24% cash for the deal. The combined company will hold operations in more than 80 countries and together their total 2014 revenues were roughly $56 billion.

Halliburton and Baker Hughes

Source: HAL/BHI Merger Presentation

Both Halliburton and Baker Hughes expect to certify substantial compliance with the DOJ’s second request, issued to each company, by mid-summer, according to the press release. Timing agreements are often entered into in connection with large, complex transactions and provide the DOJ additional time to review responses to its second requests. Because of the extended review period on the DOJ’s request, Halliburton and Baker Hughes also agreed to extend the time period for closing of the acquisition to no later than December 1, 2015.

$3.5 billion in assets already up for sale, more on the way

Halliburton is currently marketing for sale its Fixed Cutter and Roller Cone Drill Bits, Directional Drilling and Logging-While-Drilling (LWD)/Measurement-While-Drilling (MWD) businesses in order to meet regulatory compliance for its merger. If necessary, Halliburton and Baker Hughes have both agreed to divest segments that generate up to $7.5 billion to satisfy antitrust concerns.

During the company’s Q1’15 conference call, Chief Integration Officer and Executive Vice President Mark McCollum said the revenue associated with these businesses was approximately $3.5 billion. “We are very pleased with the strong interest that’s been expressed in these assets by potential buyers, both within the energy industry as well as outside the industry.”

When asked what other assets might be sold to meet antitrust laws, McCollum said it was too early to tell, but that more divestitures would happen. “We know that there will be some additional divestitures to do, we don’t exactly know what those are going to be.” McCollum also said that the company is well under the $7.5 billion threshold laid out in the merger, making additional sales possible.

Halliburton and Baker Hughes continue to be in discussions with the DOJ, the European Commission and other competition enforcement authorities with respect to their merger. To date, there is no agreement between the companies and any competition enforcement authority as to the adequacy of the merger.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.