By now, the proposed merger of Baker Hughes (BHI) and Halliburton (HAL) is not news. Yet despite a deal that shareholders on both sides are adamantly in favor of, the spread between the Baker Hughes acquisition price and its current stock price remains extreme. This, in part, reflects the widespread view of intense Department Of Justice (DOJ) concern about the deal. Many shareholders seem unsure if the deal will ever come to fruition, but both companies appear to be committed to doing everything they can to get final approval from the government.
The current pessimism in the markets represents a good opportunity for investors. Analysts are not nearly as a pessimistic as the broader market about the deal’s chances of closing with several citing “noise” around the deal as a good opportunity to invest and earn a handsome return.
The merger will create a company with significant synergies and economies of scale, giving the new Halliburton better ability to compete with Schlumberger (SLB). Given that, it makes sense that Halliburton will do whatever it must to close the deal in the end.
In a sign of some regulatory hold-up, the companies recently announced that they were amending the timing portion of the merger agreement to the later of December 15th or 30 days after both companies certify final substantial compliance with the DOJ second request.
Essentially what this means is that the DOJ is still thinking about whether it has…