After rumors and tumultuous negotiations that became hostile, Houston-based Halliburton Co. (HAL) announced Monday, Nov. 17, it agreed to buy crosstown rival Baker Hughes Inc. (BHI) for $34.6 billion in equity in a deal with an enterprise value of $38 billion.
If the deal closes, the new company will be the world's second biggest energy services provider after Schlumberger Ltd. (SLB) .
The price includes $19 per share in cash and 1.12 of a Halliburton share for each Baker Hughes share totaling $78.62 per share, a 40.8% premium over Baker Hughes' stock price on Oct. 10, the day before Halliburton's initial offer, and a 54% premium to Baker Hughes' closing price on Nov. 12, the day before reports about a potential deal began surfacing.
Halliburton said that, over longer time periods, the deal represents a one year premium of 36.3%, a three year premium of 34.5% and a five year premium of 25.9%.
RBC Capital Markets analyst Kurt Hallead had expected $80 to $95 per share.
Baker Hughes stockholders will end up with 36% of the combined company. The combined company's board is expected to expand to 15 members, three from Baker Hughes. Halliburton agreed to withdraw the slate of directors it had nominated to Baker Hughes' board.
Halliburton said the value represents 8.1 times estimated Ebitda for this year and 7.2 times estimated Ebitda for next year.
Halliburton intends to finance the $8 billion cash portion of the deal through cash on hand ($2 billion as of the third quarter) and fully committed debt financing.