Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

Thanks, Obama. With their long engagement seemingly about to be broken by antitrust officials, Halliburton and Baker Hughes won't even get the full attention you'd think a likely-busted $37.5 billion deal deserves. No, the collapse of Pfizer's $184 billion merger with Allergan following the president's denunciation of tax inversions sucks up a hell of a lot of oxygen.

Halliburton and Baker Hughes say they will contest the Justice Department's case. They argue the deal ultimately will save money for exploration and production clients despite reducing the oilfield-services industry's big three-and-a-half structure -- those two companies plus Schlumberger and the smaller Weatherford International -- to two-and-a-half. A settlement is possible.

But as the tortured antitrust review process has shown, on several continents, this was always a hard idea to sell. Only recently, Total spoke out openly against the deal (note: when the French national oil champion dislikes your merger, don't expect a favorable competition ruling on that side of the Atlantic, at least.)

Baker Hughes' discount to the implied offer from Halliburton
Source: Bloomberg

So there's a good chance that these two companies will have to soldier on as singletons amid the worst slump for the industry in a generation.

On the face of it, Halliburton's prospects look brighter. It struck the deal in November 2014, when oil still changed hands at $75 a barrel and just before the fateful OPEC meeting that sent the market into a tailspin. The implied valuation for Baker Hughes then -- almost $60 in cash and stock -- is about 40 percent higher than where the shares trade now. Indeed, since the announcement, the combined market capitalization of the two companies has dropped by about $24 billion -- almost what Baker Hughes was worth on its own at the time.

Times Have Changed
Market capitalization
Source: Bloomberg

Yet while the target traditionally fares worse when a deal dies, don't count out Baker Hughes.

For a start, investors have had more gossip about this relationship's troubles than you'd find on any given cover of People magazine. That has driven Baker Hughes' valuation toward the bottom of its peer group in terms of price-to-book multiples, a useful backstop metric in an extreme downturn.

Throwing the Book
Price-to-book multiples
Source: Bloomberg

On the more commonly used multiple of enterprise-value-to-Ebitda, Baker Hughes looks less of a bargain -- but only if you forget to make one crucial adjustment.

At face value, the stock trades at 10.8 times 2017 Ebitda. That is second only to traditional leader Schlumberger.

Runner Up
Enterprise value as a multiple of forecasted 2017 Ebitda
Source: Bloomberg

But this misses one thing if the deal doesn't happen: Halliburton paying Baker Hughes a $3.5 billion reverse breakup fee. Factoring in that transfer of cash pushes Baker Hughes' pro-forma Ebitda multiple down to about 9 times and Halliburton's up to about 9.7 times.

That breakup fee is also important because, in the current industry environment, cash is the most precious commodity of all. Looking at the performance of the four companies' stocks since the deal was announced, the one that really stands out, and not in a good way, is Weatherford.

Under the Weather
Indexed stock price performance
Source: Bloomberg

Back when the merger was first made public, Weatherford was touted as potentially a big winner, as it would be able to buy assets sold by the combined new rival and also pick up business from oil majors trying to maintain competition on contracts. What has hurt the stock, apart from the industry slump and the waning prospects for the deal, is debt.

Spot the Difference
Net debt as a multiple of trailing Ebitda
Source: Bloomberg

Factoring in the breakup fee, Baker Hughes would actually flip from having net debt to net cash on its balance sheet of about $1.8 billion. Halliburton's net debt, meanwhile, would rise to 2.1 times Ebitda.

Baker Hughes could likely use the money, as it will need to invest in people and equipment to revivify its capabilities and brand after the long distraction of the merger process.

Equally, though, despite having already made some cost cuts, there is likely room for Baker Hughes to streamline its business further if the deal really is dead and it can plan things properly on a standalone basis. Above all, that cash cushion will set the company apart in what remains, despite Wednesday's jump in oil prices, a depressed and volatile energy market.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in San Francisco at

To contact the editor responsible for this story:
Mark Gongloff at