Oil & Gas Mergers Can either Sink or Swim, the Tale of Two Mega Deals



The Schlumberger-Cameron merger will soon be finalized. The companies’ final hurdle, receiving approval for the merger from the Chinese Ministry of Commerce, was overcome on Friday, March 25th. The Ministry believes that Cameron, a Houston-based company, does not overlap with too many of Schlumberger’s current business operations. This is why it has also passed through the U.S. Justice Department and E.U. regulatory systems, which found it did not violate any of their respective laws regarding antitrust.

Antitrust laws are in place to prevent monopolistic mergers which would unfairly dominate a market. Billion-dollar mergers can, understandably, take some time for regulatory authorities to review, as both companies have many assets and complex areas of business operations. Fortunately, the Schlumberger-Cameron merger has moved swiftly: the merger was announced in August of last year, and they now expect to finalize the deal on April 1st. However, the same cannot be said for the Halliburton-Baker Hughes merger.

Halliburton announced in November of 2014 that it was going to attempt a merger with Baker Hughes, but they have run into problems passing regulatory inspections. Right now, the merger is facing issues in the US, the EU and Brazil. Brazilian and European authorities do not expect to have a ruling until August 2016 at the earliest, as they have concluded that additional time is needed in order to more thoroughly analyze the particulars of the deal. There are concerns that the two companies share too many similar business interests and will therefore dominate the competition. The companies have been selling off assets in an attempt to more appropriately fit together, but efforts thus far have not yet appeased concerned officials.

The previous deadline for the merger was December 2015, but Halliburton and Baker Hughes announced that they were going to extend the merger deadline to April 30, 2016. Now, with the extended deadline approaching, the companies must consider if they will continue on with the merger. The deal has already cost both companies much time and capital, Halliburton reported spending over $300 million on merger-related costs in 2015. Pushing the date back further will not guarantee the merger’s success, but it will certainly increase the costs associated with the merger.

At this point, it is unclear whether Halliburton and Baker Hughes will extend the finalization date for the deal or decide to take another path. Perhaps it would be wise to make clear the path for restless shareholders, some of whom were opposed to a merger and have watched it gradually fail.

Article written by HEI contributor Timothy McNally.

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