Baker Hughes 2009 Annual Report Download - page 87

2009 Form 10-K 13
Risk Factors Related to the Merger with BJ Services
Our expectations regarding our business may be impacted
by the following risk factors related to the pending merger
with BJ Services:
Failure to complete the merger with BJ Services could
negatively affect our stock price and our future business
and financial results.
Completion of the merger with BJ Services is not assured
and is subject to risks, including the risks that approval of
the transaction by stockholders of both Baker Hughes and
BJ Services is not obtained or that certain other closing con-
ditions are not satisfied. If the merger is not completed,
our ongoing business may be adversely affected and will
be subject to several risks, including the following:
• having to pay certain significant costs relating to the merger
without receiving the benefits of the merger, including in
certain circumstances a termination fee of $175 million to
BJ Services;
• the attention of our management will have been diverted to
the merger instead of on our operations and pursuit of other
opportunities that may have been beneficial to us; and
• resulting negative customer perception could adversely
affect our ability to compete for, or to win, new and
renewal business in the marketplace.
We will incur substantial transaction and merger-related
costs as well as assume additional debt from BJ Services
in connection with the merger and our stockholders will
be diluted by the merger.
We expect to incur a number of non-recurring transaction
and merger-related costs associated with completing the
merger with BJ Services, combining the operations of the two
companies and achieving desired synergies. These fees and
costs will be substantial. Additional unanticipated costs may be
incurred in the integration of the businesses of Baker Hughes
and BJ Services. Although we expect that the elimination of
certain duplicative costs, as well as the realization of other effi-
ciencies related to the integration of the two businesses, will
offset the incremental transaction and merger-related costs
over time, this net benefit may not be achieved in the near
term, or at all. In addition, we will assume approximately
$500 million of long-term debt from BJ Services.
The merger will dilute the ownership position of our cur-
rent stockholders who are expected to hold approximately
72.5% of the combined company’s common stock on a fully
diluted basis immediately after the merger.
If the merger is completed, we will be subject
to additional risks.
The success of the merger will depend, in part, on our
ability to realize these anticipated benefits from combining the
businesses of Baker Hughes and BJ Services. However, to real-
ize these anticipated benefits, we must successfully integrate
the operations and personnel of BJ Services into our business.
If we are not able to achieve these objectives, the anticipated
benefits of the merger may not be realized fully or at all or
may take longer to realize than expected. Because we and
BJ Services have operated independently and, until the comple-
tion of the merger, we will continue to operate independently,
it is possible that the integration process could take longer
than anticipated and could result in the loss of valuable
employees or the disruption of each company’s ongoing busi-
nesses or inconsistencies in standards, controls, procedures,
practices, policies and compensation arrangements, which
could adversely affect the combined company’s ability to
achieve the anticipated benefits of the merger. The combined
company’s results of operations could also be adversely
affected by any issues attributable to either company’s opera-
tions that arise or are based on events or actions that occur
prior to the closing of the merger. Further, the size of the
merger may make integration difficult, expensive and disrup-
tive, adversely affecting our revenues after the merger. Failure
to achieve the anticipated benefits could result in increased
costs or decreases in the amount of expected revenues and
could adversely affect our future business, financial condition,
operating results and prospects. In addition, we may not be
able to eliminate duplicative costs or realize other efficiencies
from integrating the businesses to offset part or all of the
transaction and merger-related costs incurred by us.
Our performance following the merger, could be adversely
affected if we are unable to retain and maintain high technol-
ogy equipment and certain key employees and to a greater
extent by the skilled labor shortages of certain types of quali-
fied personnel, including engineers, project managers, field
supervisors, linemen and other qualified personnel, which both
Baker Hughes and BJ Services have from time-to-time experi-
enced. These shortages have also negatively impacted, and
may continue to negatively impact, the productivity and profit-
ability of certain projects and can result in lost sales during
periods of unanticipated demand. Our inability to bid on new
and attractive projects, or maintain productivity and profitabil-
ity on existing projects, including ones developed by BJ Ser-
vices, due to the limited supply of high technology equipment
and skilled workers could negatively affect our profitability and
results of operation.
In addition, the approval or regulatory requirements of cer-
tain government or regulatory agencies in connection with the
merger could contain terms, conditions, or restrictions, such as
the divestiture of assets or line of business that would be detri-
mental to the Company after the merger. Additionally, even
after the statutory waiting period under the anti-trust laws
and even after completion of the merger, governmental
authorities could seek to block or challenge the merger as they
deem necessary or desirable in the public interest. In addition,
in some jurisdictions, a competitor, customer or other third
party could initiate a private action under the antitrust laws
challenging or seeking to enjoin the merger, before or after it
is completed. The Company or BJ Services may not prevail and
may incur significant costs in defending or settling any action
under the anti-trust laws.