The Star Early Edition

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.

- David Wethe and Matthew Monks New York

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

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