Halliburton, the world's second-biggest oilfield services company, said today it is buying Baker Hughes, the world's No. 3 oilfield services provider, for $34.6 billion.
Bloomberg reports: "With the agreement, Halliburton eliminates a chief rival and expands its business portfolio and reach at a time when falling oil prices have pushed the industry into a downturn. The merger will likely draw intense antitrust scrutiny, especially where North America businesses overlap."
In a statement announcing the deal, Halliburton Chairman and CEO David Lesar said the merger would save the company $2 billion annually.
Once finalized, Baker Hughes shareholders will receive 1.12 Halliburton shares plus $19 for each share they own. That values Baker Hughes shares at $78.62 per share. The company's stock price has fallen more than 30 percent since June, and stood last week at $51. Baker Hughes shareholders would own 36 percent of the combined company.
Halliburton's stock has seen a similar slide in recent months, from $74 in July to $56 last week, and finished Monday's trading at $49 after news of the merger. Baker Hughes stock shot up to $65.
The combined company's revenue would be slightly more than that generated by Schlumberger Ltd., the world's No. 1 oil services company, but "would not have the breadth or depth of Schlumberger," according to Judson Bailey, an analyst at Wells Fargo, who was quoted by The Associated Press.
The AP reported that the announcement could portend similar mega deals in the energy sector "as companies with stronger balance sheets buy those that have seen their value drop precipitously." The AP reported that ExxonMobil, General Electric and Siemens may now look to expand as potential rivals become cheaper.