The capital management firm, ValueAct Capital Management LP, handles over $15 billion in place of individual and institutional investors. The firm revealed its 22 million share stake in Baker Hughes Incorporated (NYSE:BHI) on January 16th in regulatory filing. This amounted to a total $1.43 billion with a $65.04 share price. ValueAct also increased the stake it has in Halliburton Company (NYSE:HAL) through the acquisition of 30 million of the company’s shares, as reported by a Bloomberg source.
Considering that the report is true, ValueAct’s stake is now at $2.77 billion in Halliburton Company (NYSE:HAL) which is nearly 18% of ValueAct’s funds.
It was reported last November that the two oilfield service companies will enter a merger after further negotiations which may amount to $34 billion. The stock holders of Baker Hughes’ Incorporated (NYSE:BHI) will receive 1.12 of Halliburton Company’s (NYSE:HAL) shares with a $19 cash amount for each of their Baker Hughes Incorporated (NYSE:BHI) shares.
Crude oil price have declined by 50% after reaching a bit over a $100/barrel last year. Crude oil of West Texas Intermediate is trading at nearly $53.53/ barrel, with Brent crude oil for the same period at $62.53/barrel.
Due to these low prices, both the oil field service giants have thought about merging so they can cope with market pressures. Given the investment that ValueAct has put into the merger shows just how much the company thinks that this investment has potential. Both companies think that the merger will result in synergies, cost savings and tax savings which will help them reap more benefits, even with the crude oil price drop that it taking over the market. The merger will help protect them from market pressures as they will share costs and expertise.
This merger will also prove beneficial for Halliburton Company’s (NYSE:HAL) portfolio given that it would give it an edge over its major competitor and largest company worldwide of oilfield services Schlumberger Limited. (NYSE:SLB). Through the help of Baker Hughes’ Incorporated (NYSE:BHI), Halliburton Company (NYSE:HAL) just might reach for the stars hence putting it far ahead in the lead over other companies who do not have the resources to cope with the downfall.
After the merger takes place, Halliburton Company (NYSE:HAL) will have a $8 billion cash flow which may help it make dividend payments to investors or can also be used for capital investment and financial services, while the market takes over all other companies in its turmoil.
Jeff Ubben, CEO of ValueAct, showed his support in the merger after the filing as he stated that his company wants that the deal be closed while the oil prices in the market stay low. This will help the merger in terms of cost savings and protect it against the downturn of the market. ValueAct is a firm believer in the merger which is why it has stakes in both the companies.
Halliburton Company (NYSE:HAL) however, will have to divest a few of its assets given that regulators have antitrust approvals for the merger.
