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Hallilburton to buy Baker Hughes for $34.6 billion

The two companies announced Monday they have reached a definitive agreement under which Halliburton will acquire all the outstanding shares of Baker Hughes in a stock and cash transaction.

The transaction is valued at $78.62 per Baker Hughes share, representing an equity value of $34.6 billion and enterprise value of $38.0 billion, based on Halliburton’s closing price on Nov. 12, 2014, the day prior to public confirmation by Baker Hughes that it was in talks with Halliburton regarding a transaction.

Upon the completion of the transaction, Baker Hughes stockholders will own approximately 36 percent of the combined company. The agreement has been unanimously approved by both companies’ Boards of Directors.

The transaction combines two highly complementary suites of products and services into a comprehensive offering to oil and natural gas customers. On a pro-forma basis the combined company had 2013 revenues of $51.8 billion, more than 136,000 employees and operations in more than 80 countries around the world.

“We are pleased to announce this combination with Baker Hughes, which will create a bellwether global oilfield services company and offer compelling benefits for the stockholders, customers and other stakeholders of Baker Hughes and Halliburton,” said Dave Lesar, Chairman and Chief Executive Officer of Halliburton. “The transaction will combine the companies’ product and service capabilities to deliver an unsurpassed depth and breadth of solutions to our customers, creating a Houston-based global oilfield services champion, manufacturing and exporting technologies, and creating jobs and serving customers around the globe.”

Lesar said the stockholders of Baker Hughes will immediately receive a substantial premium and have the opportunity to participate in the significant upside potential of the combined company.

“Our stockholders know our management team and know we live up to our commitments,” Lesar said. “We know how to create value, how to execute, and how to integrate in order to make this combination successful. We expect the combination to yield annual cost synergies of nearly $2 billion. As such, we expect that the acquisition will be accretive to Halliburton’s cash flow by the end of the first year after closing and to earnings per share by the end of the second year. We anticipate that the combined company will also generate significant free cash flow, allowing for the return of substantial capital to stockholders.”

“This brings our stockholders a significant premium and the opportunity to own a meaningful share in a larger, more competitive global company,” Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes said. “By combining two great companies that have delivered cutting-edge solutions to customers in the worldwide oil and gas industry for more than a century, we will create a new world of opportunities to advance the development of technologies for our customers. We envision a combined company capable of achieving opportunities that neither company would have realized as well – or as quickly – on its own, all while creating exciting new opportunities for employees.”

Lesar said he believes that the expertise of both companies’ employees and leaders will be a competitive advantage for the combined company.

“Together with the people of Baker Hughes, we will establish a team to develop a detailed and thoughtful integration plan to make the post-closing transition as seamless, efficient and productive as possible,” he said. “We look forward to welcoming the talented employees of Baker Hughes and are pleased they will be joining the Halliburton team.”