The Baker Hughes Inc.-BJ Services Co. marriage took a few more steps down the aisle this week as the companies received stockholder approval of the deal and reached an agreement with the U.S. Department of Justice (DOJ) on what assets they will need to divest before consummating the merger.
First announced in late August 2009 (see Daily GPI, Sept. 1, 2009), the deal — which has been valued anywhere between $5.5 billion and $8.4 billion — would move the combined company to the No. 3 spot in market value for oilfield services behind leaders Schlumberger Ltd. and Halliburton Co. National Oilwell Varco Inc. is currently the No. 3 oilfield services provider.
During Wednesday’s special meetings of stockholders, BJ Services’ shareholders voted to approve and adopt the agreement and plan of merger with Baker Hughes. Baker Hughes’ stockholders voted to approve issuance of additional shares of common stock of Baker Hughes. The Baker Hughes stockholders also approved amendments to the two Baker Hughes Long-Term Incentive Plans for directors, officers and employees.
A day earlier the companies reached a general understanding with the Antitrust Division of the DOJ regarding divestitures that will be required as a condition to governmental approval of the pending merger. Under the deal, Baker Hughes will be required after the closing to divest two stimulation vessels (the HR Hughes and Blue Ray) and certain other assets used to perform sand control services in the U.S. Gulf of Mexico. The DOJ, Baker Hughes and BJ Services are finalizing a proposed final judgment, which must be approved by the Federal District Court before the closing can occur. The companies said they expect to close the merger “as soon as practicable” in early April.
Baker Hughes has said the merger would give the combined company the ability to compete around the world. The union is also seen as a bet that natural gas will play a bigger role internationally. When the deal was originally announced, Baker Hughes CEO Chad Deaton said he sees opportunities to grow, both in individual shale markets in North America and in the rest of the world in the future, and in deepwater drilling.
BJ Services is one of the largest pressure pumpers in the world, a process used in unconventional natural gas plays to break up rock. Pressure pumping now accounts for 75% of BJ Services’ business; it is expected to be 20% of the combined company’s revenue. In 2008 pressure pumping accounted for 1% of Baker Hughes’ revenue.
Once the merger is completed, BJ Services shareholders would own more than a quarter stake in Baker Hughes, and two of its board members would join Baker Hughes’ board.
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