Halliburton, Baker Hughes fail to get a grip on huge oil merger

Baker Hughes may lose much of its premium in a proxy fight as the possibility of deal becomes less likely.

THE stand-off between Halliburton and Baker Hughes extended over the weekend as talks remained stalled on a potential merger of the world’s second- and third-largest oilfield service companies.

Negotiations fell through late in the week over price and potential US antitrust objections, prompting Halliburton to notify Baker Hughes on Friday that it intended to conduct a proxy fight for control of the board at the April 2015 annual meeting, Baker Hughes said.

Baker Hughes confirmed the takeover talks on Thursday after media reports of a potential deal. They collapsed a day later, and Baker Hughes released letters in which chief executive Martin Craighead took Halliburton chief executive Dave Lesar to task for refusing to raise his offer and pressuring the company to make a hasty decision by threatening a proxy fight.

“I am very disappointed by your complete unwillingness to show any flexibility on your initial value proposal,” Craighead wrote to Lesar on Wednesday, according to a letter on Baker Hughes’s website.

Halliburton’s proposed price wasn’t disclosed by Baker Hughes, which has a market value of about $26 billion.

In its statement, Baker Hughes advised its shareholders the Halliburton offer undervalued the company and that they shouldn’t “take any action at this time”.

Emily Mir, a Halliburton spokeswoman, declined to comment. Halliburton would eliminate one of its chief rivals in the merger, expanding its business portfolio and market clout at a time when falling oil prices have plunged the industry into a downturn.

Any deal is expected to draw federal antitrust scrutiny, especially where the two companies’ businesses overlap most in North America. Negotiations over billions of dollars in assets that would need to be sold to satisfy the US Justice Department proved another obstacle in the takeover.

The companies may have to sell $7.5 billion to $10 billion in assets to address regulator concerns. They generated a combined $55.5 billion of sales in the 12 months through September, data compiled by Bloomberg show.

Baker Hughes rose more than 17 percent after the takeover talks were made public.

The company might lose much of that premium in a proxy fight as the possibility of getting a deal done becomes less likely, he said.

Baker Hughes fell 2.3 percent to $58.51 after the close of regular trading on Friday in New York.

Halliburton fell to $54.98 after closing at $55.08. – Bloomberg