Halliburton, the world’s second-biggest oilfield services provider, said Monday it will acquire its smaller rival Baker Hughes in a deal worth $34.6 billion in cash and stock.
The deal would create an oilfield services behemoth to take on market leader Schlumberger NV as falling oil prices threaten to erode demand.
The merger is widely expected to raise anti-trust concerns and Baker Hughes (BHI) shares early Monday were trading well short of the offer of $80.69 per share, based on Friday’s close.
Halliburton (HAL) said it was ready to pay $3.5 billion in termination fees if the transaction did not get antitrust approvals.
Halliburton shares were down sharply on the news.
The company said if required, it was ready to divest businesses worth $7.5 billion in revenue to get anti-trust approvals, although it believed regulators would ask for “significantly less.”
There are at least seven major product lines where there is overlap between the two companies, who offer scores of services and technology, from drill bits, to cementing and casing work, to artificial lift systems that improve output from wells.
“With $2 billion of synergies identified, we expect a key driver to the timing of this combination is the urgency to further reduce costs in order to be competitive if exploration and production companies push to retrench spending going forward,” Global Hunter Securities analysts wrote in a note.
The talks between the two companies started over a month ago and came to a head on Friday when Halliburton threatened to replace Baker Hughes’s board after its initial offer was rejected.
Halliburton said on Monday it withdrew its slate of board nominees and that the combined company’s 15-member board will have three Baker Hughes members. The company will be led by Halliburton’s Chief Executive Dave Lesar.
Baker Hughes shareholders will get 1.12 Halliburton shares plus $19 in cash for every share held, and own 36 percent of the combined company.
The combined company’s 2013 revenue was $51.8 billion on a pro-forma basis, more than Schlumberger’s $45.3 billion.
Credit Suisse and BofA Merrill Lynch are Halliburton’s financial advisers, while Goldman, Sachs & Co is advising Baker Hughes.
On a pro-forma basis, the combined company had 2013 revenues of $51.8 billion, more than 136,000 employees and operations in more than 80 countries around the world, Halliburton said in a statement.
“The transaction will combine the companies’ product and service capabilities to deliver an unsurpassed depth and breadth of solutions to our customers, creating a Houston-based global oilfield services champion, manufacturing and exporting technologies, and creating jobs and serving customers around the globe,” Dave Lesar, chairman and CEO of Halliburton, said in a press release.
The Halliburton-Baker Hughes deal is one of the biggest of recent times. Here’s a roundup of some of the biggest transactions in the energy space from the past few decades, according to Bloomberg data.
—Reuters contributed to this report.