How Will The Halliburton-Baker Hughes Deal Failure Impact Halliburton’s Equity Value?
The US Justice Department filed a civil antitrust suit to block the Halliburton-Baker Hughes deal on Wednesday, April 6th, 2016. The merger, a combination of the No. 2 and No. 3 oil services companies in the industry, is likely to curb free competition in almost 20 business lines in the global well drilling and oil construction industry. While the two companies offered divestitures of almost $7.5 billion worth of their assets to obtain regulatory clearances, these were not considered adequate by the regulatory authorities. Hence, a law suit has been initiated against the deal.
While Halliburton and Baker Hughes will contest the law suit, if the merger fails due to antitrust issues, Halliburton will be obligated to pay a break-up fee of $3.5 billion to the shareholders of Baker Hughes. Below we show how this deal-breaker fee creates a downside of more than 8% to Halliburton’s equity value, by increasing net debt.
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Have more questions about Halliburton (NYSE:HAL)? See the links below:
- Did Halliburton Pay A Higher Price For Baker Hughes’ Acquisition?
- Downward Revision of Halliburton’s Price From $42 To $38 Per Share
- How Valuable Are Halliburton’s North American Markets Compared To Its Middle East & Asian Markets?
- How Much Will Halliburton’s Revenue Grow If Oil Prices Rebound To $100 Per Barrel By 2018?
- What Is Halliburton’s Fundamental Value Based On 2016 Expected Numbers?
- How Much Will Halliburton’s Revenue And EBITDA Grow Over The Next Five Years?
- How Has Halliburton’s Revenue And EBITDA Changed Over The Last Five Years?
- What Is Halliburton’s Revenue And EBITDA Breakdown?
- How Has Halliburton’s Revenue And EBITDA Composition Changed Over The Last Five Years?
- Halliburton: The Year 2015 In Review
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Halliburton Company
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