NEW YORK (TheStreet) -- Shares of Baker Hughes (BHI) are up 4.85% to $61.60 in pre-market trade after the oilfield services company confirmed that it has engaged in preliminary discussions with Halliburton Co. (HAL) regarding a potential business combination transaction.
These discussions may or may not lead to any transaction. Baker Hughes does not intend to comment further on market speculation or disclose any developments unless and until it otherwise deems further disclosure is appropriate or required, the company said in a statement
By eliminating a competitor, Halliburton, already the world's second-biggest provider of oilfield services, would gain market clout that would help insulate it from a sustained market decline. A combination of Halliburton with number three Baker Hughes would be a little more than half the size of larger rival Schlumberger (SLB) , according to Bloomberg.
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"We rate BAKER HUGHES INC (BHI) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."