Halliburton Co. (NYSE:HAL) and Baker Hughes Inc. (NYSE:BHI) announced Sunday, May 1, that the two oilfield services companies terminated the merger agreement they entered into in November 2014, effective April 30, 2016.
Executives from both companies cited antitrust concerns and a prolonged downturn in oil prices as factors in the collapse of the deal. In early April, the companies announced they would contest the US Department of Justice's effort to block their pending merger.
“While both companies expected the proposed merger to result in compelling benefits to shareholders, customers and other stakeholders, challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action,” said Dave Lesar, chairman and CEO of Halliburton. “While disappointing, Halliburton remains strong,” he continued
Martin Craighead, chairman and CEO of Baker Hughes, commented: “This was an extremely complex, global transaction and, ultimately, a solution could not be found to satisfy the antitrust concerns of regulators, both in the United States and abroad.”
In connection with the termination of the merger agreement, Halliburton will pay Baker Hughes the termination fee of $3.5 billion by Wednesday, May 4, 2016.
Analysts with Seaport Global Securities said the announcement that the companies would cease merger talks is “disappointing on some levels, it has been clear the market expected the merger to fail given the widening merger spread.”
The deal termination “eliminates a material overhang issue that has prevented many investors from buying shares of both companies,” the analysts said. Shares of both companies were up Monday morning.