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Does Halliburton's Surprise Earnings Delay Signal The End Of Baker Hughes Merger? KeyBanc Thinks So

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Halliburton Company HAL 1.93% has announced a delay in its 1Q16 earnings release from April 25 to May 3. The company attributed the delay to the looming April 30 deadline for either renewing or ending its merger agreement with Baker Hughes Incorporated BHI 3.3%.

KeyBanc Capital Markets’ Robin Shoemaker maintained Overweight ratings on both Halliburton and Baker Hughes, saying that the merger between the two companies is likely to be called off.

The companies need to extend the merger agreement, if they intend to carry out their announced plan to contest the DOJ’s decision to block the deal on anti-trust grounds.

Merger Unlikely

While both the companies have the right to terminate the agreement on April 30, Halliburton will be required to pay Baker Hughes a breakup fee of $3.5 billion, analyst Robin Shoemaker said.

Both the companies are evaluating their prospects of winning a trial, which would involve proving wrong the DOJ’s conclusion of the merger ending substantial competition, leading to higher prices and lesser innovation and the creation of a global duopoly.

Shoemaker mentioned that there is little chance of “a negotiated settlement based on the outright rejection of various divestiture proposals made by HAL and BHI to address the DOJ’s anti-trust concerns.”

The analyst expects Baker Hughes’ board of directors to announce next week its decision of not extending the merger agreement.

DateFirmActionFromTo
Apr 2016CitigroupMaintainsBuy
Apr 2016Morgan StanleyMaintainsOverweight
Apr 2016JefferiesMaintainsBuy

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