Baker Hughes Inc. said it will buy back shares and debt and simplify its organization to save $500 million annually after the collapse of a planned merger with Halliburton Co.
The third-largest oil services provider is taking steps to cut costs related to the merger agreement, Baker Hughes said in a statement Monday. On Sunday, the companies called off their $28 billion combination after stiff resistance from regulators in the U.S. and Europe over antitrust concerns. Halliburton will pay Baker Hughes a $3.5 billion termination fee by May 4.
Houston-based Baker Hughes will buy back shares totaling $1.5 billion and debt totaling $1 billion, from proceeds of the breakup fee, the company said. It will also refinance its $2.5 billion credit facility, which expires in September 2016. The company will focus on well construction, including drilling services, drill bits and completions, and production services, including artificial lift and production chemicals, Chief Executive Officer Martin Craighead said.
"More than ever, our customers need to lower their costs and maximize production,” Craighead said in the statement.
Halliburton announced the Baker Hughes takeover in November 2014 in a bid to better compete against industry leader Schlumberger Ltd. But as the tussle for regulatory approval turned into a war of attrition, shares of Halliburton and Baker Hughes declined amid the worst oil slump in a generation, reducing the deal’s value from $34.6 billion when it was announced.
Baker Hughes will hold a conference call for analysts and investors at 8 a.m. New York time Tuesday, accessible on LIVE.