Halliburton-Baker Hughes Deal Scuttled

Halliburton's (HAL) - Get Report merger with Baker Hughes (BHI) is dead, but one analyst think Halliburton is the better stock.

"Of the two stocks, I think Halliburton is probably the more comfortable one to own," said David Nelson, chief strategist at Belpointe Asset Management. "I don't think you're going to see normalized earnings for these companies until 2017 or 2018, and that's really dependent on where oil prices go."

The deal was first proposed back on November 17, 2014, and was valued at $35 billion. Then, West Texas Intermediate crude oil, the U.S. benchmark, was trading at roughly $76 a barrel.  On Monday, the commodity stood at $45.72, or 40% lower than when the deal was initially announced.

Oil has rallied so far in 2016, rising 12.6%. Nelson said that should help oil field services companies, which typically feel the pain first when oil prices slump.

Nelson said it's not realistic to expect these companies to return to the valuations they had when oil was trading at $100 a barrel.

Halliburton will be paying Baker Hughes a $3.5 billion break-up fee. Baker Hughes said it will use the funds to buy back $1.5 billion worth of its own stock and pay off $1 billion in debt.

"We intend to build on our strong foundation and market position by simplifying the structure of our business and evolving our commercial strategy to deliver significant value to shareholders," said Baker Hughes Chairman and CEO Martin Craighead.

Nelson said the failed merger shows the divide between big government and big business.

"Anything the [government] views as even a little bit anticompetitive, they're going to go after," Nelson said.