Halliburton Company HAL − one of the largest oilfield service providers in the world – has once again filed a request for approval from the EU antitrust regulators for its $35 billion acquisition of Baker Hughes Incorporated, as per Reuters. Four months ago, the authorities had rejected Halliburton’s bid due to insufficient data.
It is to be noted that by Jan 12, the EU authorities will come to a decision on whether to approve the deal or start an investigation. It is common knowledge now that Canada, Kazakhstan, South Africa and Turkey have already approved the deal while antitrust regulators in the U.S. are yet to announce their decision. The Australian authorities too are anticipated to declare their decision on Dec 17.
Last year, after high speculation, Halliburton and its smaller rival Baker Hughes confirmed that they have entered into a merger agreement. Apart from the elimination of a major competitor, the combination with Baker Hughes would give the world’s second-biggest provider of oilfield services the much-needed boost in taking on Schlumberger Ltd. SLB – the largest player in the field.
The merger − expected to close in the latter half of 2015 − would increase the breadth and depth of the product portfolio of the combined entity, thus increasing leverage. Moreover, Halliburton expects the combined company to achieve cost synergies of about $2 billion per year. This should boost Halliburton’s financials since major upstream players are cutting capital spending in this depressed pricing market.
By the end of the first year of the merger’s completion, Halliburton anticipates the deal to be accretive to its cash flow. Also, by the end of the second year, the deal should reflect positively on the earnings of the combined company.
Houston, TX-based Halliburton currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, some better-ranked players in the energy sector are Murphy USA Inc. MUSA and Energy Transfer Equity LP ETE. Both these stocks sport a Zacks Rank #1 (Strong Buy).
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