Cameron merges with Schlumberger, Halliburton – Baker Hughes deal opposed

Halliburton Headquarters
Source: DollarPhotoClub

Less than two months after it received unconditional clearance from the European Commission, the merger between Schlumberger and Cameron became a fact on Friday, 1st April. According to an announcement from Schlumberger, following the merger, each Cameron stockholder is entitled to receive 0.716 shares of Schlumberger common stock and $14.44 in cash, in exchange for each Cameron share. Schlumberger has issued approximately 138 million shares pursuant to the merger. As a result, former Cameron stockholders own approximately 10 percent of Schlumberger’s outstanding shares of common stock.

With principal offices in Paris, Houston, London and The Hague, and reported revenues of $35.47 billion in 2015, Schlumberger is the world’s biggest oilfield services company. According to a statement issued on the company’s website, the newly-finalised transaction combines two complementary technology portfolios into a pore-to-pipeline products and services company, integrating Schlumberger reservoir and well technology with Cameron wellhead and surface equipment, flow control and processing technology and resulting in the industry’s first complete drilling and production systems.

Meanwhile, Schlumberger’s major rival Halliburton, who announced a proposed takeover of No.3 oilfield company Baker Hughes in 2014, seems to have been stopped in its tracks after the U.S. Justice Department sought to block the deal arguing that it would lead to higher prices in the sector.

“The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers,” U.S. Attorney General Loretta Lynch said in a statement on Wednesday. “Our action makes clear that the Justice Department is committed to vigorously enforcing our antitrust laws.”

There is concern that the deal – initially valued at $35 billion, its value now diminished to $26 billion – would remove competitiveness from the oilfield services market.

“I have seen a lot of problematic mergers in my time. But I have never seen one that poses so many antitrust problems in so many markets,” said Bill Baer, head of the Justice Department’s Antitrust Division, in a conference call with reporters.

The Justice Department argues that the merger would leave only two dominant suppliers in 20 business lines in the global well drilling and oil construction services industry, with the recently enlarged Schlumberger being one of the two. In 11 of those lines, ranging from offshore well cementing to onshore fracking plugs, a combined Halliburton-Baker Hughes would have more than 50 percent of the market and in two cases more than 80 percent of the market.

Unsurprisingly, Haliburton disagrees with this assessment. The company issued a statement in which it says that:  “The companies believe that the DOJ (Justice Department) has reached the wrong conclusion in its assessment of the transaction and that its action is counter-productive, especially in the context of the challenges the U.S. and global energy industry are currently experiencing.”

Back in October, in anticipation of the problems with anti-trust regulation, Halliburton disclosed that it was planning to get rid of three of its drilling businesses and its liner hangers business. Baker Huges was expected to sell its core completions business, its sand control business in the Gulf of Mexico and its offshore cementing businesses in Australia, Brazil, the Gulf of Mexico, Norway and the United Kingdom.

Across the pond, the merger of the two companies also faces delays after European anti-trust regulators requested additional information.

 

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