Halliburton's Deal for Baker Hughes Put in Stock-Market Jeopardy

  • Takeover premium widens to second-biggest since deal announced
  • Jefferies sees `worrying signs,' reduces odds of completion

Halliburton Co. faces increasingly long odds of completing one of the highest-priced and longest-running U.S. takeovers now pending, if the stock market is any guide.

The chart below shows the gap between the per-share value of Halliburton’s offer for Baker Hughes Inc. and the target company’s stock price in percentage terms since the proposal was made about a year ago. The cash-and-stock deal, valued at $30.2 billion as of yesterday, would combine the second- and third- biggest providers of oilfield services.

Yesterday’s gap widened by 4.7 percentage points to 22 percent, the second-largest differential since the deal was announced on Nov. 17. The biggest was 23.7 percent on Aug. 24, with the stocks at or near their lows for the year as U.S. shares tumbled. Premiums usually approach zero when deals are near completion, rather than widening.

“Worrying signs persist,” Brad Handler, an analyst at Jefferies LLC, wrote yesterday in a report. He cited concern that regulators, especially in the European Union, may bar Halliburton from buying Baker Hughes on antitrust grounds. The deal is under review in the U.S. and Australia as well as in the EU.

Handler cut the probability that the companies, both based in Houston, will complete the deal to 67 percent from 85 percent. Baker Hughes shares may decline 25 percent to 30 percent if the takeover is scrapped, he wrote.

Halliburton’s offer is the eighth-largest U.S. takeover in progress, according to data compiled by Bloomberg. It’s also one of only three pending offers valued at more than $10 billion that was made last year. The others are Merck KGaA’s proposal to buy Sigma-Aldrich Corp., a chemical company, and Exelon Corp.’s plan to acquire Pepco Holdings Inc., another utility.

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