Baker Hughes Inc.NYSE
Tue, Nov. 8, 2:48 PM
- It's time to buy Baker Hughes (BHI -0.2%) now that the dust has settled regarding the company's merger with General Electric's (GE +0.6%) oil and gas business, Guggenheim analysts say.
- Guggenheim estimates the new company will generate $4.9B in EBITDA in 2018 - a bit less than the $5.2B-$5.5B forecast by the companies - and should trade at a peer average 10.6x EBITDA, implying a fair value for BHI of ~$63, but the firm believes synergies provide another ~$4 of upside if GE is able to realize greater cost savings.
- The firm also finds the industrial logic is sound: As Schlumberger (SLB -0.1%) has shown, regional and product line diversity enhance through-cycle returns and cash flow, which are benefits that the new BHI should be able to realize as a result of its pro forma portfolio.
Mon, Nov. 7, 3:19 PM
- General Electric (GE +2.5%) now contends it is paying $76/share for Baker Hughes (BHI +0.4%), according to an update of its original deal presentation that provides additional subsegment data, a timeline of GE oil and gas history, and its analysis of deal economics.
- GE also raises its pro-forma EBITDA forecast for 2018, now expecting $5.5B in 2018 EBITDA with GE and BHI each contributing $2.4B, $600M in cost synergies and $100M in revenue synergies.
- Evercore ISI analysts think GE will exceed its cost synergy estimate and sees fair value at $62-$67/share on the higher EBITDA estimate.
Mon, Oct. 31, 6:50 PM
- Citigroup analysts believe the deal between General Electric (NYSE:GE) and Baker Hughes (NYSE:BHI) strikes a good balance for GE and BHI, as GE is not selling at the bottom, valuation seems fair for BHI shareholders, and GE management retains control to roll out its digital and service focus across a much broader oil and gas platform.
- Citi views the deal (I, II, III) favorably, as it "reflects deployment of a meaningful portion of the ~$20B in incremental leverage GE had noted as available for transactions over the next few years," but valuation is reasonable and "the deal enhances [GE]’s visibility to EPS growth over the next several years."
- The firm also notes BHI’s weak stock showing, likely given concerns that GE’s "non-cash contribution to the deal (in the form of 37.5% of GE oil and gas) doesn’t provide enough value to Baker Hughes shareholders – we think that concern will diminish over time" given the improved competitive and cost position of the combined company.
- Simmons analyst Bill Herbert cites another likely reason for BHI's 6.3% swoon in today's trade: The new partnership leaves the company more leveraged to deepwater and international projects, which are not as flexible as the U.S. onshore business.
Mon, Oct. 31, 10:30 AM
- Baker Hughes (BHI -1%) erases opening gains to trade in the red, while General Electric (GE +0.9%) is higher amid plans to combine their oil and gas operations.
- The new company will be 62.5% owned by GE, with GE Oil & Gas CEO Lorenzo Simonelli serving as President and CEO; GE will fund a special one-time cash dividend of $17.50/share, or $7.4B, to existing BHI shareholders, who will own 37.5% of the new company.
- The deal creates a company with more than $32B in FY 2015 revenue that could cut costs to better compete with rivals such as Schlumberger (SLB -0.9%) to provide equipment and services to oil rigs and wells; the $32B combined revenue places the new company only 8%-9% behind SLB.
- The combined companies expect to generate $1.6B of synergies by 2020, primarily driven by cost savings; GE expects the deal to be accretive to 2018 EPS by $0.04 and 2020 EPS by $0.08.
- Analysts see a high likelihood of the deal's completion given little product overlap outside of the Artificial Lift business and the relatively smaller size of the deal vs. the rejected Halliburton-Baker Hughes (HAL -0.5%) tie-up.
- Moody’s, Fitch and S&P all affirmed GE’s credit ratings with stable outlooks following the announcement.
Mon, Oct. 31, 6:25 AM
- Banking on a recovery in crude prices, General Electric (NYSE:GE) is merging its oil and gas business with Baker Hughes (NYSE:BHI), creating a large, listed player, that could compete with rivals like Schlumberger (NYSE:SLB).
- GE will own 62.5% of the new company, which will have combined revenue of $32B, while Baker Hughes shareholders will own 37.5% and get a special one-time cash dividend of $17.50 per share after the deal closes (expected in mid-2017).
- GE +1%; BHI +6.6% premarket
Sun, Oct. 30, 10:50 PM
- The roughly $30B deal would see the creation of a new publicly-traded entity comprised of Baker Hughes (NYSE:BHI), GE's oil and gas business, and some cash from GE, reports the WSJ.
- The new company would have more than $25B in annual revenue and thus be of large enough scale to better compete with rivals like Schlumberger (NYSE:SLB).
- The structure of the deal also gives GE control of Baker Hughes without having to shell out for an outright acquisition.
- Previously: WSJ: GE, Baker Hughes could reach deal as soon as next week (Oct. 28)
Fri, Oct. 28, 6:35 PM
- Merger discussions between General Electric (NYSE:GE) and Baker Hughes (NYSE:BHI) are advancing and could result in a deal as early as next week, WSJ reports.
- BHI +1.3% AH after surging 8.4% in today's trade following yesterday's WSJ report on a possible deal in the works; BHI today confirmed through an email to employees that it is in discussions with GE, while GE said late yesterday that the company was pursuing "potential partnerships" with BHI but not an "outright purchase."
- The companies reportedly are negotiating a complicated transaction, perhaps involving merging GE’s oil and gas business with Baker Hughes, which provides oilfield services, and then spinning off the combined business into a new public company.
- Any Reverse Morris Trust deal would allow GE to avoid a big tax bill and allow shareholders to reap any cost savings or other benefits from putting the two businesses together, as well as any upside from a rebound in oil prices.
Thu, Oct. 27, 7:52 PM
- With after-hours trading winding down, Baker Hughes (NYSE:BHI) has given back much of a surge tied to buyout chatter with GE, as GE clarifies that an outright purchase is right out.
- "We are in discussion with Baker Hughes on potential partnerships. While nothing is concluded, none of these options include an outright purchase," GE's Chief Communications Officer Deirdre Latour tells CNBC.
- Baker Hughes had spiked as high as $65.50 (a 20%-plus gain) in late trading, but after the GE clarification, the stock is trading up 6.9% after hours.
Thu, Oct. 27, 6:43 PM
- Baker Hughes (NYSE:BHI) +18.5% AH following a Dow Jones report that General Electric (NYSE:GE) is in talks to buy the company.
- With a $23B market cap, BHI could go for more than $30B in a takeover, given the typical premium, according to the report, which notes that a deal would rank as GE's biggest ever.
- GE reportedly approached BHI about a takeover, but no other details are known.
Mon, May 2, 2:08 AM
- Following opposition from U.S. and European antitrust regulators, Halliburton (NYSE:HAL) has officially abandoned its pursuit of rival Baker Hughes (NYSE:BHI), leaving it to pay a $3.5B breakup fee as a result of the deal falling apart.
- The cash-and-stock acquisition - valued at $34.6B when it was announced in November 2014, and now worth about $28B - would have brought together the world's No. 2 and No. 3 oil services companies, raising concerns about higher prices in the sector.
- Previously: Halliburton is calling off its $28B takeover of Baker Hughes (May. 01 2016)
Wed, Apr. 27, 2:24 PM
- Baker Hughes (BHI +2.5%) shares shook off early losses and have since racked up solid gains despite reporting worse than expected Q1 earnings.
- Citi’s Scott Gruber reiterates a Buy rating and $53 price target, saying Q1 results should have only a modestly negative impact given the potential restructuring to come following the likely end of Halliburton’s (HAL +2.1%) pursuit of the company; Gruber continues to like BHI’s balance sheet, restructuring potential, share buyback potential and take-out potential.
- BHI says the terms of the merger agreement required it to retain certain expenses, which limited its ability to cut costs in Q1 and hurt operating margins, costs which Cowen analysts note would go away soon if the merger deal breaks.
- Stephens analyst Matthew Marietta is more cautious, putting his Overweight rating and price target under review.
Tue, Apr. 26, 2:59 PM
- Even if the merger of Halliburton (HAL -0.2%) and Baker Hughes (BHI +0.9%) falls apart, Citi’s Scott Gruber and his team are confident that both will be fine, reiterating Buy ratings on both stocks.
- BHI still has its technology advantage, the firm says - recalling that HAL wants BHI’s directional drilling, bits, artificial lift and chemicals while their completion products are strong - and although morale may have suffered in the run-up to a merger, the staff largely remains.
- BHI also should have $5B of cash on its balance sheet by the end of Q3 in the absence of a merger, which it could use to “upgrade their frac segment, attract new talent and execute a large buyback.”
- Citi says HAL remains its favorite name given its leadership position in shale services, and the firm believes the shale service recovery should surprise positively and HAL's free cash flow should structurally improve.
- Now read Halliburton-Baker Hughes deal probably dead, analysts say
Mon, Apr. 25, 10:16 AM
- Analysts say Halliburton's (HAL -0.1%) postponement of its Q1 earnings report until May 3 likely means its merger agreement with Baker Hughes (BHI -0.8%) will be terminated.
- Baird's Daniel Leben says that while HAL did not explicitly state in its Friday pre-announcement of Q1 revenues that the deal was off, the decision to delay its conference call and its move away from maintaining greater-than-required operational capacity are "signs the BHI deal will break after April 30."
- Jefferies analyst Brad Handler concurs, adding that investors largely expected the outcome once the Justice Department filed its suit to block the merger in early April and thus expects limited share price reaction.
- Baird reiterates its Neutral rating and $38 price target on HAL, and Jefferies maintains its Buy rating and $43 target price.
- Now read 'Life has changed' for Halliburton
Wed, Apr. 20, 11:29 AM
- Halliburton’s (HAL +0.6%) bid to buy Baker Hughes (BHI -0.9%) faces a formal complaint as soon as this month from European Union regulators through a statement of objections that would list concerns about how the deal would hurt competition throughout the EU, Bloomberg reports.
- HAL’s plans have been stalled repeatedly by the EU as regulators seek more information about the deal; last week, the EU set a new deadline of Aug. 11 for a final ruling on the merger.
- The deal already faces opposition from the U.S. Justice Department, which has sued to block the deal saying it threatens to eliminate head-to-head competition in 23 products and services used in oil exploration.
- Now read Halliburton: $3.5 billion break-up fee... ouch!
Wed, Apr. 20, 10:33 AM
- With the chances of a Halliburton (HAL -0.4%) takeover dimming as the Justice Department files suit, Baker Hughes (BHI -0.1%) ought to consider a merger of equals with National Oilwell Varco (NOV -2.4%) as “the best route to value creation over the next cycle,” according to J.P. Morgan analyst Sean Meakim.
- A BHI-NOV merger would be more than a marriage of convenience, Meakim says, adding that “neither side needs a transaction from a balance sheet perspective, but each could benefit strategically” and a deal would not face significant regulatory hurdles.
- The agreement between BHI and HAL is scheduled to expire on April 30, but Meakim points out that the merger deal is not dead, and HAL likely will to fight hard to find a path to deal completion and avoid the $3.5B breakup fee.
- The firm rates BHI at Neutral with a $36 price target.
- Now read Why shares of National Oilwell Varco will likely go down
Thu, Apr. 14, 2:57 PM
- P-E firm Carlyle Group (CG -1%) is in serious talks to buy oilfield services assets from Halliburton (HAL -0.4%) and Baker Hughes (BHI +5.2%) that could be valued at more than $7B, Dow Jones reports.
- The talks would mark a shift for HAL and BHI, which have focused on overcoming Justice Department objections to their planned merger by attempting to sell the assets to General Electric (GE +0.1%); GE remains in the mix, but reaching agreement on a price for the assets has been difficult, according to the report.
- The need for HAL and BHI to strike a divestiture deal took on increased urgency last week when the DoJ filed an antitrust lawsuit challenging their proposed $35B merger.
- Now read The Halliburton-Baker Hughes merger is falling apart - what happens next?