The CC was very much driven by a bunch of talking points driven by antitrust counsel. The discussion was very general and did not get into any details and remained very general.
Looking at the questions during the conference call we think the fundamental analysts were not prepared for a deal, let alone one that HAL went from underpaying and a Board nomination fight to overpaying and pretending there is nothing to see (and move along). HAL did upfront say it expects a multiple re-rate. We expect HAL to trade in low-$50s due to high amount of stock issuance and nosebleed price.
The financing for the transaction is fully committed. Shareholder votes for BHI should not be an issue, but HAL shareholders might be mores sceptical considering the price paid.
Regulatory is a big concern:
The big issue will be the regulatory approval. DOJ should handle the case in the US as this is industrial, but review from foreign regulators might prove very tricky and lengthy. I would like especially point out review by the Russian regulator considering the current political climate between Russia and the West over the Ukrainian Crisis. Honestly the tone and amount of details for future remedies feels like the deal was rushed over the week-end and great uncertainties remain from a regulatory stand point.
Furthermore given the recent drop in share price and likely drop in earnings and sales globally for the oil service industry regulators are likely to take a hard stand....
At 13.5% spread at the current level I think the deal is likely to remain wide for a while. It reminds me very much so of a RIO/BHP given the sheer size of the transaction and regulatory uncertainty.
More details to follow on this.