The stock of Baker Hughes was down 10% Monday morning. Hand wringing over a potential break-up of the Halliburton merger is spreading and the Halli-Baker deal is thought by investors to be on the brink of falling apart.
Baker Hughes Stock Is Down 15% In Two Trading Days
New Reports Raise Fear Of US Regulators Blocking Deal
The DOJ is set to wrap up its review of the deal on Tuesday of this week unless Halliburton agrees to an extension. Reports over the weekend suggest that an extension is unlikely. The merger arb spread (a measure of fear that the deal falls apart) surged to its highest level yet.
Source: Oilpro, Bloomberg
In a story posted late Sunday evening, the New York Post wrote that Halliburton CFO Christian Garcia told investors in private meetings Wednesday that the company wouldn’t agree to an extension without clear instructions from the feds on what it needed to divest to win approval. Halliburton contested the Post’s reporting, saying Garcia told investors the company was committed to taking the necessary steps to close the deal and that its proposed divestitures should satisfy the regulator.
But the hint of brinksmanship has nervous investors even more concerned about the deal’s chances. A Halliburton refusal to an extension without more details would force the feds to either clear the deal or file a lawsuit to block it.
Halliburton has reportedly brought in a big-time anti-trust attorney (Sean Boland, Practice Group Chair – Antitrust & Competition Law at Baker Botts) to assist with the deal. Boland has made a name for himself by representing companies against anti-trust regulators. “Boland really likes to play a game of brinksmanship with the regulators and is thought to be uncomfortably contentious,” the New York Post wrote.
Sean Boland Has Reportedly Been Brought In To Fight For The Deal
A week ago, we addressed the escalating regulatory challenges facing the Halli-Baker deal as Brazilian regulators voiced their concerns about the transaction. With the deal announced more than a year ago, Halliburton has made progress towards billions of dollars worth of divestitures to appease competition committees – GE is widely thought to be a leading bidder.
But regulatory concerns being raised at the 11th hour have investors worried the deal will fall apart. Without a deal, Baker Hughes stock could fall further as the Halliburton bid has been supportive of the stock. And questions have been raised as to how much of Baker’s competitive edge has been lost as they await the deal to close. Rebounding from this break-up would likely take the Baker organization years.