Oil Deal | Halliburton – Baker Hughes
Halliburton and Baker Hughes merger rumors have been swirling for weeks due to the current state of both companies and the state of the oil industry. The advantages of the merger will greatly help both firms on multiple levels. $2 billion worth of cost synergies will be the largest immediate factor pending a merger. $800 million worth of expansion in the recent North American operation areas should create a 20% margin for growth. Both companies’ boards have approve the deal with a $3.5 billion breakup fee should it fall through. With the current state of the oil market the $2 billion dollar cost savings will greatly help the competitive edge of the new company.
Combining both the cost synergies and the expansion combinations the new company will look at around a $1.5 billion operation efficiency surplus within North America. This spells great forecasting futures for Halliburton who historically holds a margin of 15%. Their earnings per share in 2013 was $2.36. Once all of these combinations become active, the operating margin should bump up to 20% with a EPS 85% above last years mark, at $4.35. These numbers are based on a 2017 mark for realization. Overall with the valuation of the North American expansion combinations, the synergies between the merging companies would be near $3 billion dollars, a number enough to open eyes regarding the deal. The two, once competitors will combine as early as June of next year pending the details of the deal go through.
The world of mergers and acquisitions is a volatile and exciting one. To be able to look into two companies and speculate the future of the combination is something that entices many investors and companies. To see more about mergers and acquisitions visit http://johnjellinek.info where John Jellinek covers many business deals along with this site.
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