IW 50 Best: Major Baker Hughes Acquisition Stuck in the Pipeline

March 18, 2010
Justice Department approval still needed for BJ Services buyout

Oilfield services company Baker Hughes Inc. must play the waiting game with the U.S. Department of Justice to finalize its deal to acquire BJ Services Co.

The DOJ's antitrust division has questioned the overlap between the companies' simulation and sand-control businesses in the U.S. Gulf of Mexico, Baker Hughes said on March 15.

The companies already gained all necessary approvals from foreign jurisdictions to close the deal, Baker Hughes said. Both companies have mailed a joint proxy statement to their stockholders for meetings scheduled to take place March 19 to approve the merger.

But Baker Hughes said it doesn't expect all matters to be finalized before the meeting. If that happens, the meetings will be rescheduled.

The companies will disclose the final resolution with the DOJ prior to the meeting date. The final decision should not be material to the business or financial performance of the combined company following the merger. Baker Hughes expects the acquisition to close before the end of March.

Baker Hughes Inc.
At A Glance

Baker Hughes Inc.
Houston, Texas
Primary Industry: Machinery
Number of Employees: 34,400
2008 In Review
Revenue: $11.86 billion
Profit Margin: 13.78%
Sales Turnover: 1.0
Inventory Turnover: 4.26
Revenue Growth: 13.77%
Return On Assets: 16.59%
Return On Equity: 25.93%
Baker Hughes first announced the deal in August as a move that broadens the company's portfolio and provides greater efficiencies for customers. BJ Services specializes in pressure pumping, a technology used to develop new oil and natural-gas fields. The $5.5 billion deal would increase Baker Hughes' pressure-pumping business to 20% of the company's revenue from less than 1% in 2008.

Pressure pumping has grown as the oil and gas industry looks for new ways to obtain full value from their reservoirs, according to Baker Hughes.

"[The deal] will better position us to drive international growth and to compete for the growing large integrated projects by incorporating pressure pumping into our product offering," said Chad Deaton, Baker Hughes president and CEO, when the deal was announced in August.

Baker Hughes Incorporated finished 2009 with a profit that beat analyst expectations. In the fourth quarter net income was $84 million, or 27 cents a share, an 81% drop from the year-earlier period, the company said in its Jan. 26 report. Revenue for the quarter was $2.43 billion, down 24% compared with $3.19 billion for year-ago period.

Revenue for the year 2009 was $9.66 billion, down 19% from 2008. Full-year net income was $421 million, or $1.36 per share, compared with $1.64 billion, or $5.30 per share, in 2008.

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