Halliburton Co. (NYSE:HAL) and Baker Hughes Inc. (NYSE:BHI) to Form a Formidable Nexus

Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI), oil field companies, in a joint announcement stated that the two companies have come to an agreement on the basis of which Halliburton (NYSE:HAL) will take over Baker Hughes (NYSE:BHI) in a cash and stock transaction worth 34.6 billion dollars. The deal took place on the following terms: Stockholders of Baker Hughes (NYSE:BHI) will get 1.12 shares of Halliburton (NYSE:HAL)’s stock, along with 19 dollar a piece on each share amounting to 78.62 per share.

This price will act as a premium to the 41 percent of Baker Hughes (NYSE:BHI) closing price. Halliburton (NYSE:HAL) assured Baker Hughes (NYSE:BHI) that the deal will take place in terms of cash up front and debt financing. Halliburton (NYSE:HAL) has also agreed to divert any business that makes up to 7.5 billion dollars annual revenue, that is if the regulators desire it. Halliburton (NYSE:HAL) has offered to give Baker Hughes (NYSE:BHI) a breakup fee in case the regulators doesn’t approve of it.

The breakup fee would be 3.5 billion and the deal will be finalized in the second half of next year. Baker Hughes (NYSE:BHI) will still be holding 36 percent of substantial stock. Halliburton (NYSE:HAL)’s management will take over Baker Hughes (NYSE:BHI) and the Baker Hughes (NYSE:BHI) name will be replaced by Halliburton (NYSE:HAL) which is obvious since the major stock will be held by Halliburton (NYSE:HAL).

Board of directors will compromise of 15 personnel, three of which will be of Baker Hughes (NYSE:BHI)’ management. In 2013, the combined revenue of both companies came out to be 51.8 billion and they employed 136,000 employees. Halliburton (NYSE:HAL) assured that it knows how to run a combined company and run it successfully. It is fully aware of the techniques, through which value is created and also about the execution of plans.

The initial yield is expected to be 2 billion and the deal will enhance Halliburton (NYSE:HAL)’s cash flow frequency; Halliburton (NYSE:HAL) has been emphasizing on the fact that the combined company will benefit both companies in a significant way. Previously, when both of these companies were operating individually, the revenue was mediocre. In fact the profits didn’t exist at all; we can say that they barely subsisted.

Now as a nexus both the companies will benefit from the multiplying revenue. The revenue gained will be put into revitalizing the company’s research and development departments, real estate operations, North American margin improvement and other integral areas. This nexus between Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) will prove critical against Schlumberger’s (NYSE:SLB) revenue.

Schlumberger Ltd. (NYSE:SLB) is currently the leading firm in the market in this category; but against the new Halliburton Co. (NYSE:HAL), it will face major issues. Although Halliburton Co. (NYSE:HAL) will lag when it comes to market cap, but that would change as time goes on and synergies are created. Halliburton Co. (NYSE:HAL)’s shares traded negatively, dropping down by 3.2 percent in premarket trading on Monday.