Halliburton spends 35 billion to buy Baker Hughes

US energy giants Halliburton and Baker Hughes are to merge after Halliburton agreed to pay $35 billion (£22.3 billion) in cash and stock. The move would unite the two companies and create an entity dominant in US onshore services such as hydraulic fracturing and horizontal drilling.

Halliburton expressed confidence that the deal would clear regulatory hurdles, saying it was prepared to shed assets to mollify antitrust concerns that could arise in Asia, Europe and the Americas.

"At the end of the day, we wouldn't have done this deal if we didn't believe it was achievable from a regulatory standpoint," Halliburton Chief Executive Dave Lesar told Reuters.

But after the announcement on Monday (November 17th), Baker Hughes shares were trading well below the offer, suggesting that investors were not so sure of that Halliburton would be able to clear regulatory approvals. Baker Hughes shares rose nearly 11 per cent to $66.44 each on Monday, short of Halliburton's offer of $80.69.

However, Kurt Hallead, oilfield services analyst at RBC Capital Markets, told Reuters the risk of the deal failing was low. "I think the assessment on divestitures matches up pretty closely with the work we've done. I don't anticipate there being any roadblocks," he said.

Halliburton and Baker Hughes are merging amid plunging crude prices, which have dropped to a more than four-year low. The deal eliminates one of Halliburton’s chief rivals, creating a giant competitor against market leader Schlumberger Ltd.

Deals are riskiest when they involve a company acquiring another that’s roughly the same size, like Halliburton is doing, Pavel Savor, a finance professor at Temple University’s Fox School of Business, told Bloomberg.

“What’s clear is that the management teams of both companies - especially of Halliburton – are taking a significant risk here, and so far the market doesn’t seem to think it’s a risk worth taking,” he said. Today, Halliburton shares rose 1.1 per cent to $49.77 at 9:53 ET. New York time.

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.