Halliburton and Baker Hughes Reach Agreement to Combine in Stock and Cash … – Businessweek


Baker Hughes Stockholders to Receive 1.12 Halliburton Shares Plus
$19.00 in Cash for Each Share They Own


Transaction Values Baker Hughes at $78.62 per Share as of November
12, 2014


Highly Complementary Product Lines, Global Presence and Cutting-Edge
Technologies Will enable Combined Company to Create Added Value for
Customers


Accretive to Halliburton Cash Flow by the End of Year One, with
Nearly $2 Billion in Synergies and Significant Cash Flow to Support
Future Returns of Capital to Stockholders


HOUSTON–(BUSINESS WIRE)–Nov. 17, 2014–
Halliburton Company (NYSE:HAL) and Baker Hughes Incorporated (NYSE:BHI)
today announced a definitive agreement under which Halliburton will
acquire all the outstanding shares of Baker Hughes in a stock and cash
transaction. The transaction is valued at $78.62 per Baker Hughes share,
representing an equity value of $34.6 billion and enterprise value of
$38.0 billion, based on Halliburton’s closing price on November 12,
2014, the day prior to public confirmation by Baker Hughes that it was
in talks with Halliburton regarding a transaction. Upon the completion
of the transaction, Baker Hughes stockholders will own approximately 36
percent of the combined company. The agreement has been unanimously
approved by both companies’ Boards of Directors.


The transaction combines two highly complementary suites of products and
services into a comprehensive offering to oil and natural gas customers.
On a pro-forma basis the combined company had 2013 revenues of $51.8
billion, more than 136,000 employees and operations in more than 80
countries around the world.


“We are pleased to announce this combination with Baker Hughes, which
will create a bellwether global oilfield services company and offer
compelling benefits for the stockholders, customers and other
stakeholders of Baker Hughes and Halliburton,” said Dave Lesar, Chairman
and Chief Executive Officer of Halliburton. “The transaction will
combine the companies’ product and service capabilities to deliver an
unsurpassed depth and breadth of solutions to our customers, creating a
Houston-based global oilfield services champion, manufacturing and
exporting technologies, and creating jobs and serving customers around
the globe.”


Lesar continued, “The stockholders of Baker Hughes will immediately
receive a substantial premium and have the opportunity to participate in
the significant upside potential of the combined company. Our
stockholders know our management team and know we live up to our
commitments. We know how to create value, how to execute, and how to
integrate in order to make this combination successful. We expect the
combination to yield annual cost synergies of nearly $2 billion. As
such, we expect that the acquisition will be accretive to Halliburton’s
cash flow by the end of the first year after closing and to earnings per
share by the end of the second year. We anticipate that the combined
company will also generate significant free cash flow, allowing for the
return of substantial capital to stockholders.”


Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes
said, “This brings our stockholders a significant premium and the
opportunity to own a meaningful share in a larger, more competitive
global company. By combining two great companies that have delivered
cutting-edge solutions to customers in the worldwide oil and gas
industry for more than a century, we will create a new world of
opportunities to advance the development of technologies for our
customers. We envision a combined company capable of achieving
opportunities that neither company would have realized as well or as
quickly on its own, all while creating exciting new opportunities for
employees.”


Lesar concluded, “We believe that the expertise of both companies’
employees and leaders will be a competitive advantage for the combined
company. Together with the people of Baker Hughes, we will establish a
team to develop a detailed and thoughtful integration plan to make the
post-closing transition as seamless, efficient and productive as
possible. We look forward to welcoming the talented employees of Baker
Hughes and are pleased they will be joining the Halliburton team.”


Transaction Terms and Approvals


Under the terms of the agreement, stockholders of Baker Hughes will
receive, for each Baker Hughes share, a fixed exchange ratio of 1.12
Halliburton shares plus $19.00 in cash. The value of the merger
consideration as of November 12, 2014 represents 8.1 times current
consensus 2014 EBITDA estimates and 7.2 times current consensus 2015
EBITDA estimates. The transaction value represents a premium of 40.8
percent to the stock price of Baker Hughes on October 10, 2014, the day
prior to Halliburton’s initial offer to Baker Hughes. And over longer
time periods, based on the consideration, this represents a one year,
three year and five year premium of 36.3 percent, 34.5 percent, and 25.9
percent, respectively.


Halliburton intends to finance the cash portion of the acquisition
through a combination of cash on hand and fully committed debt financing.


The transaction is subject to approvals from each company’s
stockholders, regulatory approvals and customary closing conditions.
Halliburton’s and Baker Hughes’ internationally recognized advisors have
evaluated the likely actions needed to obtain regulatory approval, and
Halliburton and Baker Hughes are committed to completing this
combination. Halliburton has agreed to divest businesses that generate
up to $7.5 billion in revenues, if required by regulators, although
Halliburton believes that the divestitures required will be
significantly less. Halliburton has agreed to pay a fee of $3.5 billion
if the transaction terminates due to a failure to obtain required
antitrust approvals. Halliburton is confident that a combination is
achievable from a regulatory standpoint.


The transaction is expected to close in the second half of 2015.


Compelling Strategic and Financial Benefits


  • Leverages complementary strengths to create a company with an
    unsurpassed breadth and depth of products and services.
    The
    companies are highly complementary from the standpoint of product
    lines, global presence and cutting-edge technology in the worldwide
    oil and natural gas industry. The resulting company will provide a
    comprehensive suite of products and services to customers in virtually
    every oil and natural gas producing market in the world. This
    strategic combination will create an oilfield services supplier with
    the ability to serve customers through strong positions in key
    business lines, a fully integrated product and services platform,
    increased capabilities in the unconventional, deepwater and mature
    asset sectors, substantial and improved growth opportunities and
    continued high returns on capital.

  • Generates significant opportunities for synergies. In addition
    to the compelling and immediate premium Baker Hughes stockholders will
    receive, the transaction will also yield significant synergies. The
    combination will provide substantial efficiencies of scale and
    geographic scope, particularly in the Eastern Hemisphere, which will
    enhance fixed cost absorption. Once fully integrated, Halliburton
    expects the combination will yield annual cost synergies of nearly $2
    billion. These synergies are expected to come primarily from
    operational improvements, especially North American margin
    improvement, personnel reorganization, real estate, corporate costs,
    R&D optimization and other administrative and organizational
    efficiencies.

  • Enables increased cash returns to stockholders. Halliburton
    expects the transaction to be accretive to cash flow by the end of the
    first year after closing and to earnings per share by the end of the
    second year. Halliburton expects that the combined company will
    maintain a strong investment grade credit profile and substantial
    financial flexibility. In addition, the combined company will generate
    significant free cash flow, allowing the return of cash to the
    combined investor base through dividends, share repurchases and
    similar actions.


Headquarters, Management and Board of Directors


The combined company will maintain the Halliburton name and continue to
be traded on the New York Stock Exchange under the ticker symbol “HAL.”
The company will be headquartered in Houston, Texas.


Dave Lesar will continue as Chairman and Chief Executive Officer of the
combined company. Following the completion of the transaction, the
combined company’s Board of Directors is expected to expand to 15
members, three of whom will come from the Board of Baker Hughes.


Concurrently with the execution of the merger agreement, Halliburton
withdrew its slate of directors nominated for the Board of Directors of
Baker Hughes.


Advisors


Credit Suisse is serving as lead financial advisor and BofA Merrill
Lynch is also serving as financial advisor to Halliburton. Baker Botts
L.L.P. and Wachtell, Lipton, Rosen & Katz are serving as Halliburton’s
legal counsel. BofA Merrill Lynch, as lead arranger, and Credit Suisse
are providing fully committed debt financing in support of the cash
portion of the consideration.


Goldman, Sachs & Co. is serving as financial advisor to Baker Hughes.
Davis Polk & Wardwell LLP and Wilmer Cutler Pickering Hale and Dorr LLP
are serving as Baker Hughes’ legal counsel on this transaction.


Conference Call


Halliburton (NYSE: HAL) and Baker Hughes (NYSE: BHI) will host a
conference call on Monday, November 17, 2014, to discuss the proposed
business transaction. The call will begin at 7:00 AM Central Time (8:00
AM Eastern Time).


An accompanying slide deck will be posted to both the Halliburton and
Baker Hughes websites at www.halliburton.com
and www.bakerhughes.com/investor.
Please visit either website to listen to the call live via webcast. In
addition, you may participate in the call by dialing (866) 225-4091
within North America or (703) 639-1128 outside North America. A passcode
is not required. Attendees should log in to the webcast or dial in
approximately 15 minutes prior to the call’s start time.


A replay of the conference call will be available on both companies’
websites for seven days following the call. Also, a replay may be
accessed by telephone at (888) 266-2081 within North America or (703)
925-2533 outside of North America, using the passcode 1648003.


About Halliburton


Founded in 1919, Halliburton is one of the world’s largest providers of
products and services to the energy industry. With more than 80,000
employees, representing 140 nationalities in over 80 countries, the
company serves the upstream oil and gas industry throughout the
lifecycle of the reservoir – from locating hydrocarbons and managing
geological data, to drilling and formation evaluation, well construction
and completion, and optimizing production through the life of the field.
Visit the company’s website at www.halliburton.com.
Connect with Halliburton on Facebook,
Twitter,
LinkedIn,
Oilpro
and YouTube.


About Baker Hughes


Baker Hughes is a leading supplier of oilfield services, products,
technology and systems to the worldwide oil and natural gas industry.
The company’s 61,000 employees today work in more than 80 countries
helping customers find, evaluate, drill, produce, transport and process
hydrocarbon resources. For more information on Baker Hughes, visit: www.bakerhughes.com.


Forward-Looking Statements


The statements in this press release that are not historical statements,
including statements regarding the expected timetable for completing the
proposed transaction, benefits and synergies of the proposed
transaction, future opportunities for the combined company and products,
future financial performance and any other statements regarding
Halliburton’s and Baker Hughes’ future expectations, beliefs, plans,
objectives, financial conditions, assumptions or future events or
performance that are not historical facts, are forward-looking
statements within the meaning of the federal securities laws. These
statements are subject to numerous risks and uncertainties, many of
which are beyond the company’s control, which could cause actual results
to differ materially from the results expressed or implied by the
statements. These risks and uncertainties include, but are not limited
to: failure to obtain the required votes of Halliburton’s or Baker
Hughes’ stockholders; the timing to consummate the proposed transaction;
satisfaction of the conditions to closing of the proposed transaction
may not be satisfied or that the closing of the proposed transaction
otherwise does not occur; the risk that a regulatory approval that may
be required for the proposed transaction is not obtained or is obtained
subject to conditions that are not anticipated; the diversion of
management time on transaction-related issues; the ultimate timing,
outcome and results of integrating the operations of Halliburton and
Baker Hughes and the ultimate outcome of Halliburton’s operating
efficiencies applied to Baker Hughes’ products and services; the effects
of the business combination of Halliburton and Baker Hughes, including
the combined company’s future financial condition, results of
operations, strategy and plans; expected synergies and other benefits
from the proposed transaction and the ability of Halliburton to realize
such synergies and other benefits; expectations regarding regulatory
approval of the transaction; results of litigation, settlements, and
investigations; final court approval of, and the satisfaction of the
conditions in, Halliburton’s September 2014 settlement relating to the
Macondo well incident in the Gulf of Mexico; appeals of the
multi-district litigation District Court’s September 2014 ruling
regarding Phase 1 of the trial, and future rulings of the District
Court; results of litigation, settlements, and investigations not
covered by the settlement or the District Court’s rulings; actions by
third parties, including governmental agencies, relating to the Macondo
well incident; BP’s April 2012 settlement relating to the Macondo well
incident, indemnification, and insurance matters; with respect to
repurchases of Halliburton common stock, the continuation or suspension
of the repurchase program, the amount, the timing and the trading prices
of Halliburton common stock, and the availability and alternative uses
of cash; actions by third parties, including governmental agencies;
changes in the demand for or price of oil and/or natural gas can be
significantly impacted by weakness in the worldwide economy;
consequences of audits and investigations by domestic and foreign
government agencies and legislative bodies and related publicity and
potential adverse proceedings by such agencies; protection of
intellectual property rights and against cyber attacks; compliance with
environmental laws; changes in government regulations and regulatory
requirements, particularly those related to offshore oil and natural gas
exploration, radioactive sources, explosives, chemicals, hydraulic
fracturing services and climate-related initiatives; compliance with
laws related to income taxes and assumptions regarding the generation of
future taxable income; risks of international operations, including
risks relating to unsettled political conditions, war, the effects of
terrorism, and foreign exchange rates and controls, international trade
and regulatory controls, and doing business with national oil companies;
weather-related issues, including the effects of hurricanes and tropical
storms; changes in capital spending by customers; delays or failures by
customers to make payments owed to us; execution of long-term,
fixed-price contracts; impairment of oil and natural gas properties;
structural changes in the oil and natural gas industry; maintaining a
highly skilled workforce; availability and cost of raw materials; and
integration of acquired businesses and operations of joint ventures.
Halliburton’s and Baker Hughes’ respective reports on Form 10-K for the
year ended December 31, 2013, Form 10-Q for the quarter ended September
30, 2014, recent Current Reports on Form 8-K, and other U.S. Securities
and Exchange Commission (the “SEC”) filings discuss some of the
important risk factors identified that may affect these factors and
Halliburton’s and Baker Hughes’ respective business, results of
operations and financial condition. Halliburton and Baker Hughes
undertake no obligation to revise or update publicly any forward-looking
statements for any reason. Readers are cautioned not to place undue
reliance on these forward-looking statements that speak only as of the
date hereof.


Additional Information


This communication does not constitute an offer to buy or sell or the
solicitation of an offer to buy or sell any securities or a solicitation
of any vote or approval. This communication relates to a proposed
business combination between Halliburton and Baker Hughes. In connection
with this proposed business combination, Halliburton and/or Baker Hughes
may file one or more proxy statements, registration statements, proxy
statement/prospectus or other documents with the SEC. This communication
is not a substitute for any proxy statement, registration statement,
proxy statement/prospectus or other document Halliburton and/or Baker
Hughes may file with the SEC in connection with the proposed
transaction. INVESTORS AND SECURITY HOLDERS OF HALLIBURTON AND BAKER
HUGHES ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION
STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE
FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Any
definitive proxy statement(s) (if and when available) will be mailed to
stockholders of Halliburton and/or Baker Hughes, as applicable.
Investors and security holders will be able to obtain free copies of
these documents (if and when available) and other documents filed with
the SEC by Halliburton and/or Baker Hughes through the website
maintained by the SEC at http://www.sec.gov.
Copies of the documents filed with the SEC by Halliburton will be
available free of charge on Halliburton’s internet website at http://www.halliburton.com
or by contacting Halliburton’s Investor Relations Department by email at investors@Halliburton.com
or by phone at +1-281-871-2688. Copies of the documents filed with the
SEC by Baker Hughes will be available free of charge on Baker Hughes’
internet website at http://www.bakerhughes.com
or by contacting Baker Hughes’ Investor Relations Department by email at trey.clark@bakerhughes.com
or alondra.oteyza@bakerhughes.com
or by phone at +1-713-439-8039 or +1-713-439-8822.


Participants in Solicitation


Halliburton, Baker Hughes, their respective directors and certain of
their respective executive officers may be considered participants in
the solicitation of proxies in connection with the proposed transaction.
Information about the directors and executive officers of Halliburton is
set forth in its Annual Report on Form 10-K for the year ended December
31, 2013, which was filed with the SEC on February 7, 2014, its proxy
statement for its 2014 annual meeting of stockholders, which was filed
with the SEC on April 8, 2014, its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2014 which was filed with the SEC on October
24, 2014 and its Current Report on Form 8-K, which was filed with the
SEC on October 20, 2014. Information about the directors and executive
officers of Baker Hughes is set forth in its Annual Report on Form 10-K
for the year ended December 31, 2013, which was filed with the SEC on
February 12, 2014, its proxy statement for its 2014 annual meeting of
stockholders, which was filed with the SEC on March 5, 2014, its
Quarterly Report on Form 10-Q for the quarter ended September 30, 2014
which was filed with the SEC on October 21, 2014 and its Current Reports
on Form 8-K, which were filed with the SEC on June 10, 2014 and
September 10, 2014. These documents can be obtained free of charge from
the sources indicated above. Additional information regarding the
participants in the proxy solicitations and a description of their
direct and indirect interests, by security holdings or otherwise, will
be contained in the proxy statement/prospectus and other relevant
materials to be filed with the SEC when they become available.

Source: Halliburton Company and Baker Hughes Incorporated


For Halliburton
Investors:
Halliburton,
Investor Relations
Kelly Youngblood, 281-871-2688
Investors@Halliburton.com
or
Media:
Halliburton,
Public Relations
Emily Mir, 281-871-2601
PR@Halliburton.com
or
Joele
Frank, Wilkinson Brimmer Katcher
Andrew Siegel / Meaghan Repko,
212-355-4449
or
For Baker Hughes
Investors:
Baker
Hughes, Investor Relations
Trey Clark, 713-439-8039
trey.clark@bakerhughes.com
or
Baker
Hughes, Investor Relations
Alondra Oteyza, 713-439-8822
alondra.oteyza@bakerhughes.com
or
Media:
Baker
Hughes, Media Relations
Melanie Kania, 713-439-8303
or
Abernathy
MacGregor
Tom Johnson, 212-371-5999
TBJ@abmac.com
or
Glen
Orr, 713-205-7770
GLO@abmac.com


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