Halliburton’s already shaky $35 billion bid to buy rival Baker Hughes is at a breaking point, The Post has learned.
The Department of Justice is pushing Halliburton to go beyond its threshold of selling assets with $7.5 billion in 2013 revenue before agreeing to a combination of the second- and third-largest players in the oil-field services industry, sources said.
Plunging oil prices have punished oil-field services firms like Halliburton, which is struggling to cut costs and find buyers for oil drilling and other assets even at rock bottom prices.
“I believe this ends in a DOJ suit,” said one source who is part of the negotiations and predicts Halliburton will not be able to meet the department’s request.
Another source said the there is still a chance the deal — which would concentrate the industry between the merged Halliburton and Schlumberger — could pass regulatory muster.
“I think it’s possible a deal comes together,” the source said. “But it’s not greater than a 50-50 chance.”
The feds can sue at any time to halt the merger as the timing agreement with the company has expired but will likely give Halliburton a chance to revise its package of asset sales, sources said.
When Halliburton announced the Baker Hughes deal in November 2014, the company said it was prepared to sell assets with as much as $7.5 billion in 2013 to gain regulatory clearance — but said it expected the required divestitures to be less.
But after more than a year, the company still hadn’t reached a deal with the Justice Department on asset sales.
Last month, Halliburton said it had presented a new plan to the feds, although it didn’t disclose any details. One analyst predicted total asset sales could top $10 billion in 2013 revenue.
Halliburton is between a rock and a hard place. If it walks away from the deal, it owes Baker Hughes a huge $3.5 billion termination fee.
At the same time, falling oil prices have taken their toll on the value of oil and gas assets, giving suitors the upper hand in sale negotiations.
General Electric is in talks to buy some of Halliburton’s assets and is most interested in the company’s completion portfolio, which includes cementing operations, a source said.
But GE Chief Executive Jeff Immelt has already had to defend his forays into oil and gas and doesn’t want to pay a penny more than necessary.
Weatherford International is a possible buyer for the drilling assets. The company last week cancelled a presentation at a conference, leading to speculation it may be in talks with Halliburton.
“The potential buyers are in a pretty good bargaining position,” a source said.
Halliburton, whose shares are down 24 percent in the past 12 months, closed at $32.81 Friday.
Halliburton and the Justice Department did not return calls.
(NYPost)
