Halliburton, Baker Hughes call off $35bn merger

May 02, 2016, 1:22 PM EDT
(Source: L/flickr)
(Source: L/flickr)

Halliburton, Baker Hughes called off their proposed $35 billion merger as the obstacles piled up.

The New York Times reports:

For a year and a half, Halliburton and Baker Hughes, two big oil field services companies, had been focused on their $35 billion merger. That distraction, even as commodity prices deteriorated and their peers cut costs to survive, is finally over. The two companies announced in a statement on Sunday that they had decided to terminate their merger. The news came after an excruciatingly long regulatory review process that culminated in a lawsuit last month by the Justice Department to block the deal on antitrust grounds. “While both companies expected the proposed merger to result in compelling benefits to shareholders, customers and other stakeholders, challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action,” said Dave Lesar, chairman and chief executive of Halliburton, in Sunday’s statement.

The Wall Street Journal reports:

Baker Hughes Inc. said Monday that it is working to emerge from its failed merger with Halliburton Co. as a leaner, more focused oil-field services company, outlining plans to cut $500 million in costs while buying back $1.5 billion of shares and $1 billion of debt. Now that it is on its own, Baker Hughes says it will focus on its strengths and simplify its business. “Innovation is what we do best and what our customers need the most. It is an enviable capability that is part of our culture and continues to differentiate us in the market,” Chief Executive Martin Craighead said in a statement.

Reuters notes:

Baker Hughes, which is focusing on the development of products that lower costs and maximize production for oil and gas producers, also said on Monday it planned to refinance a $2.5 billion credit facility, which expires in September 2016. The company said an initial phase of cost-cutting was expected to result in $500 million of annualized savings by the end of 2016. In a separate regulatory filing on Monday, Baker Hughes said it cut 2,000 more jobs in the first quarter, adding to the 18,000 cut worldwide last year. The company had about 43,000 employees as of Dec. 31. Baker Hughes said last Wednesday it recorded "merger-retained" costs of $110 million, after tax, in the first quarter, leading to a bigger net loss for the period. The Houston-based company also said then that it was limiting its exposure to the unprofitable onshore pressure pumping business in North America. Halliburton, which will release its results on Tuesday, said on April 22 that revenue in the quarter slumped 40.4 percent.