Baker Hughes may be taken over by Halliburton, and apparently activist hedge fund ValueAct Capital chief Jeff Ubben thinks the odds of that happening are very good. Last week the fund disclosed a 5.1% stake in Baker Hughes, and Ubben told Bloomberg that he loves the merger idea.
“We want this deal to get done especially because of the oil price decline,” he told the media network.
ValueAct make talk to Baker Hughes management
In a regulatory filing last week, ValueAct said it may begin talking with Baker Hughes management, board members and other shareholders about the company’s strategy and how it does business. They may also discuss other topics, according to that filing.
Ubben said it makes sense for Baker Hughes to merge with Halliburton because it will get the company through the downturn in the oil industry. Crude oil prices are less than half of what they were only six months ago. Currently Baker Hughes shares trade lower than the price Halliburton has offered to purchase it for.
Will regulators approve the proposed merger?
Halliburton offered $34.6 billion to acquire Baker Hughes. A merger between the two companies would combine the second and third largest oilfield services providers in the world. As a result, it’s expected that some assets will have to be divested in order to earn the approval of antitrust regulators.
Edward Jones analyst Rob Desai told Bloomberg that the reason shares of Baker Hughes are trading at a 10% discount to Halliburton’s offer price is because investors worry that regulators may not approve the deal. He said the two oilfield services giants “are pretty committed to it.”
If Regulators do approve it, Halliburton will give Baker Hughes shareholders 1.12 Halliburton shares plus $19 per share in cash for each Baker Hughes share they own, which amounts to $62.83 per share using Friday’s closing price.
ValueAct Capital gets involved with Baker Hughes
According to The Wall Street Journal, ValueAct paid $1.22 billion for its 5.1% stake in Baker Hughes. That amounted to an average price of $55.68 per share. The firm had a busy 2014, pushing for changes at Microsoft, Valeant Pharmaceuticals, Sara Lee and others. Representatives for the firm have so far served on more than 30 boards of public companies, according to Bloomberg.
ValueAct is currently trying to secure a board seat at MSCI, in which it has about an 8.3% stake. The firm is also involved in Allison Transmission and Agrium.
