Halliburton Co.’s share price up, negotiates over the acquisition of Baker Hughes Inc. to expand its reach

People with knowledge of the process reported that Halliburton Co. is currently in negotiations to acquire Baker Hughes Inc. The transaction is expected to combine two of the biggest companies in the energy business at a time when the entire industry has been suffering from declining oil prices.

The Vice President of the industry consultant firm Spears & Associates said in a telephone interview, cited by Bloomberg: “These oilfield services companies need to have a global footprint of a complete portfolio of products and services. Schlumberger has it; a Halliburton-Baker Hughes combination would mimic the Schlumberger footprint.”

Halliburton, which is the second-largest oilfield services provider in the world, is seeking to expand its reach by taking over its competitor Baker Hughes. The latter is the third-largest provider of oilfield services worldwide. After the transaction is finalized, the company is expected to gain market share, which would protect it from a sustained market decline.

Baker Hughes confirmed the negotiations and said in a statement, cited by the Wall Street Journal, that it has been “engaged in preliminary discussions with Halliburton”.

The people familiar with the situation stated that the negotiations are moving on quickly and a contract could be signed soon.

Robin West, an expert at the Center for Strategic and International Studies, commented on the negotiations for the Financial Times: “This deal would definitely raise concerns, if not necessarily on antitrust grounds, then definitely about competition in the industry.”

Halliburton and Baker Hughes merger would have to get the approval of global regulators. Such an acquisition is expected to give the combined company the opportunity to dominate several products in the oilfield services market, especially considering the fact that after the takeover is finalized, the companies together would control about a half of the market for cementing.

Halliburton Co. was up 1.05% to close at $53.79 per share yesterday, marking a one-year decrease of 3.15%. The company is valued at $45.11 billion. According to CNN Money, the 28 analysts offering 12-month price forecasts for Halliburton Co. have a median target of $70.00, with a high estimate of $94.00 and a low estimate of $60.00. The median estimate represents a +30.14% increase from the last price of $53.79.