Baker Hughes bidder Halliburton identifies buyers for antitrust disposals
Halliburton [NYSE HAL] has identified a number of potential buyers for businesses that may need to be sold to secure antitrust clearance for the group’s acquisition of Baker Hughes [NYSE BHI], according to Halliburton’s CFO Mark A McCollum.
The likely divestitures have been carefully evaluated and Halliburton is willing to sell those assets, said McCollum on a conference call today, 17 November, following the announcement of the USD 78.62 per share deal.
The oilfield services groups are confident the combination is achievable from a regulatory viewpoint and believe the disposals will not materially alter the transaction, added McCollum. Halliburton has agreed to pay a USD 3.5bn fee if the deal terminates due to a failure to secure necessary antitrust approvals.
Some cash resulting from the divestments is likely to be returned to shareholders, McCollum and Halliburton’s CEO David J Lesar said during the question and answer session.
The deal, which represents an equity value of USD 34.6bn, is consistent with Halliburton’s best in class cash returns to shareholders, according to McCollum. The combined group’s solid capital structure will enhance its ability to continue Halliburton’s cash returns, he added.
McCollum said he believed the combined group will be rewarded with a higher trading multiple than that currently enjoyed by Halliburton and would be a “must-own stock”. The two groups share similar values and heritage and will provide an even broader range of services, said Baker Hughes’ CEO and chairman, Martin Craighead.
“Putting our companies together will create an industry leader,” said Lesar. The combined group will be “very well positioned financially”, he added.
Annual cost synergies of nearly USD 2bn are anticipated. The deal will be accretive to Halliburton’s cash flow by the end of the first year after completion, and to earnings per share by the end of the second year.
Craighead spoke of the “amazing” complementary products of the two groups. Alongside the big product line complements there were many other “complementary bricks” to build an incredibly strong North American institution, he said.
Halliburton will fund the cash component of the deal through cash on hand and fully committed debt financing. Baker Hughes shareholders will receive 1.12 Halliburton shares and USD 19.00 in cash.
The value of the deal represents 8.1x consensus 2014 EBITDA estimates and 7.2x EBITDA estimates for 2015.
Halliburton is committed to completing the transaction, according to Lesar, who added that he was personally committed to remain as CEO and oversee the deal. McCollum said Halliburton was confident it was the right time to execute the deal and the right management team is in place to make it happen.
The deal is expected to close in the second half of 2015.
Halliburton’s financial advisers are Credit Suisse and Bank of America Merrill Lynch; its legal advisers are Baker Botts and Wachtell, Lipton, Rosen & Katz. Goldman Sachs is acting as financial advisor to Baker Hughes, with Davis Polk & Wardwell and Wilmer Cutler Pickering Hale and Dorr providing legal advice.