Halliburton 2015 Annual Report Download - page 70

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Note 2. Acquisitions and Dispositions
Pending acquisition of Baker Hughes
In November 2014, we and Baker Hughes entered into a merger agreement under which, subject to the conditions set
forth in the merger agreement, we will acquire all the outstanding shares of Baker Hughes in a stock and cash transaction.
Baker Hughes is a leading supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas
industry. Under the terms of the merger agreement, at the effective time of the acquisition, each share of Baker Hughes
common stock will be converted into the right to receive 1.12 shares of our common stock and $19.00 in cash. The merger
agreement has been unanimously approved by both companies' Board of Directors, our stockholders have approved the
issuance of shares necessary to complete the acquisition of Baker Hughes, and Baker Hughes’ stockholders have adopted the
merger agreement and thereby approved the acquisition. The closing of the transaction is subject to receipt of certain regulatory
approvals and other conditions specified in the merger agreement.
Because the exchange ratio was fixed at the time of the merger agreement and the market value of our common stock
will continue to fluctuate, the total value of the consideration exchanged will not be determinable until the closing date. The
number of shares to be issued will not fluctuate based upon changes in the price of shares of our common stock or shares of
Baker Hughes common stock prior to the closing date, but the exact number of Halliburton shares to be issued with respect to
Baker Hughes stock awards will not be determinable until the closing of the transaction. We have estimated the total
consideration expected to be issued and paid to Baker Hughes stockholders in the acquisition to consist of approximately 492
million shares of our common stock and approximately $8.3 billion to be paid in cash.
In November 2015, we issued $7.5 billion aggregate principal amount of senior notes to be used for general corporate
purposes, including to finance a portion of the cash consideration for the acquisition. If the Baker Hughes acquisition is not
consummated, we are required to redeem $2.5 billion of the senior notes issued at a price of 101% of their principal amount.
See Note 8 for further information on the debt issuance and mandatory redemption features. We may finance the remainder of
the cash portion of the consideration for the acquisition with cash on hand, additional debt financing, or a combination thereof.
We have $1.1 billion remaining under the senior unsecured bridge facility commitment we obtained for the acquisition,
although we may obtain other debt financings in lieu of utilizing all or a portion of the bridge facility.
In December 2015, we announced that our timing agreement with the DOJ expired without reaching a settlement or
the DOJ initiating litigation. The DOJ informed us that they do not believe that our previously announced proposed divestitures
are sufficient to address their concerns, but acknowledged that they would assess further proposals. In January 2016, the EC
entered into Phase II of its investigation, and issued a report detailing initial concerns about the competition-related
implications of the acquisition.
Also, in January 2016, we presented to the DOJ an enhanced set of proposed divestitures in order to seek their
approval of the transaction. We also informally notified the EC and other jurisdictions about the enhanced divestitures package.
The sales process for the planned divestitures is continuing, but there is no agreement to date with any buyer or an agreement
with the DOJ or EC as to the adequacy of the proposed divestitures. Our conversations with the DOJ, the EC and other
enforcement authorities continue with the desire to resolve their competition-related concerns as soon as possible.
We remain committed to completing this transaction, despite the extended time required to obtain regulatory
approvals. We agreed with Baker Hughes to extend the period to obtain required regulatory approvals to no later than April 30,
2016, as permitted under the merger agreement, though we would proceed with closing prior to such date if all relevant
regulatory approvals have been obtained. If review by the relevant competition authorities extends beyond April 30, 2016, the
merger agreement does not terminate automatically; the parties may continue to seek relevant regulatory approvals or either of
the parties may terminate the merger agreement. Under the merger agreement, we could be required in certain circumstances,
where the termination of the merger agreement is related to failures to obtain regulatory clearances, to pay Baker Hughes a
termination fee of $3.5 billion. See "Assets Held for Sale" below for additional expenses we would recognize if the merger
agreement is terminated.
Assets Held for Sale
In April 2015, we announced our decision to market for sale our Fixed Cutter and Roller Cone Drill Bits, our
Directional Drilling, and our Logging-While-Drilling/Measurement-While-Drilling businesses in connection with the pending
Baker Hughes acquisition. The assets and liabilities for these businesses, which are included within our Drilling and Evaluation
operating segment, were classified as held for sale beginning in the second quarter of 2015 and, therefore, the corresponding
depreciation and amortization expense was ceased at that time. These anticipated divestitures are not presented as discontinued
operations in our consolidated statements of operations, because they do not represent a strategic shift in our business, as we
will continue operating similar businesses of Baker Hughes after the acquisition.
During the years ended December 31, 2015, 2014, and 2013, we generated revenue from these assets of $2.6 billion,
$3.6 billion, and $3.6 billion. Additionally, during the years ended December 31, 2015, 2014, and 2013, we recognized
operating income from these assets, consistent with our business segments presentation in Note 4, of $460 million, $391
million, and $422 million. These amounts reflect the impact of ceasing the recording of depreciation and amortization expense
for these businesses subsequent to their held for sale reclassification in 2015; the recording of such expenses would have
reduced operating income by $244 million during the year ended December 31, 2015. If the merger agreement for the pending