SA Stock Market
Baker Hughes-National-Oilwell tie-up should follow if HAL deal fails, analyst says
Apr. 20, 2016 10:33 AM • SA Editor Carl Surran
With the chances of a Halliburton (HAL -0.4%) takeover dimming as the Justice Department files suit, Baker Hughes (BHI -0.1%) ought to consider a merger of equals with National Oilwell Varco (NOV -2.4%) as “the best route to value creation over the next cycle,” according to J.P. Morgan analyst Sean Meakim.
A BHI-NOV merger would be more than a marriage of convenience, Meakim says, adding that “neither side needs a transaction from a balance sheet perspective, but each could benefit strategically” and a deal would not face significant regulatory hurdles.
The agreement between BHI and HAL is scheduled to expire on April 30, but Meakim points out that the merger deal is not dead, and HAL likely will to fight hard to find a path to deal completion and avoid the $3.5B breakup fee.
The firm rates BHI at Neutral with a $36 price target.