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As filed with the Securities and Exchange Commission on February 17, 2015

Registration No. 333-201181

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 2

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Halliburton Company

(Exact name of registrant as specified in its certificate of incorporation)

 

 

 

Delaware		1389		75-2677995
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(IRS Employer Identification Number)

3000 North Sam Houston Parkway East

Houston, Texas 77032

(281) 871-2699

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Robb L. Voyles

Executive Vice President and General Counsel

Halliburton Company

3000 North Sam Houston Parkway East

Houston, Texas 77032

(281) 871-2699

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies To:

 

Kelly B. Rose J. David Kirkland, Jr. Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002 (713) 229-1234		Daniel A. Neff David A. Katz Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 (212) 403-1309		Alan R. Crain Senior Vice President & Chief Legal and Governance Officer Baker Hughes Incorporated 2929 Allen Parkway, Suite 2100 Houston, Texas 77019-2118 (713) 439-8600		Arthur F. Golden George R. Bason, Jr. Michael Davis Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 (212) 450-4000		Christine B. LaFollette Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002-5200 (713) 220-5800

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and upon completion of the merger described in the enclosed document.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		x		Accelerated filer		¨
Non-accelerated filer		¨  (Do not check if a smaller reporting company)		Smaller reporting company		¨

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ¨

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

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The information in this joint proxy statement/prospectus is not complete and may be changed. Halliburton Company may not sell these securities until the registration statement filed with the Securities and Exchange Commission, of which this document is a part, is declared effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer, solicitation or sale is not permitted.

 

Subject to completion, dated February 17, 2015

 

3000 North Sam Houston Parkway East Houston, Texas 77032		2929 Allen Parkway, Suite 2100 Houston, Texas 77019

[                    ], 2015

Dear Halliburton Company and Baker Hughes Incorporated Stockholders:

On behalf of the boards of directors and management teams of Halliburton and Baker Hughes, we are pleased to enclose the joint proxy statement/prospectus relating to the merger of Baker Hughes into a wholly owned subsidiary of Halliburton. We believe this merger will create a leading oilfield services company that will have an unsurpassed breadth and depth of products and services and be well-positioned for continued superior growth, margins and returns, benefitting both companies’ stockholders, customers and suppliers worldwide.

When the merger is completed, Baker Hughes stockholders will receive 1.12 shares of Halliburton common stock and $19.00 in cash for each share of Baker Hughes common stock held, as described in more detail in the enclosed joint proxy statement/prospectus under the heading “The Merger Agreement—Merger Consideration.” Based on the closing price of a share of Halliburton common stock on November 12, 2014, the day prior to confirmation by Baker Hughes that it was in talks with Halliburton regarding a transaction, this represented a value of $78.62 per Baker Hughes share. Based on the closing price of a share of Halliburton common stock on February 12, 2015, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus, the merger consideration represented approximately $66.90 in value per Baker Hughes share. The value of the consideration to be received by Baker Hughes stockholders will fluctuate with changes in the price of Halliburton common stock. We urge you to obtain current market quotations for Halliburton and Baker Hughes common stock. The shares of Halliburton common stock are traded on the New York Stock Exchange (NYSE) under the symbol “HAL” and the shares of Baker Hughes common stock are traded on the NYSE under the symbol “BHI.”

In connection with the merger, Halliburton stockholders are cordially invited to attend a special meeting of Halliburton stockholders to be held on March 27, 2015 at 9:00 a.m., local time, at 3000 North Sam Houston Parkway East, Life Center–Auditorium, Houston, Texas 77032, and Baker Hughes stockholders are cordially invited to attend a special meeting of the stockholders of Baker Hughes to be held on March 27, 2015 at 9:00 a.m., local time, at 2727 Allen Parkway, Wortham Meeting Room #2, Houston, Texas 77019.

At the special meeting of the stockholders of Halliburton, Halliburton stockholders will be asked to vote on a proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement with Baker Hughes and to vote on a proposal to adjourn Halliburton’s special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares. The merger cannot be completed unless the Halliburton stockholders approve the share issuance.

Halliburton’s board of directors has reviewed and considered the terms of the merger and the merger agreement and has unanimously determined that the merger, including the issuance of shares of Halliburton common stock as contemplated by the merger agreement, is fair to and in the best interests of Halliburton and its stockholders and unanimously recommends that Halliburton stockholders vote (i) FOR the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement and (ii) FOR the proposal to adjourn Halliburton’s special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares.

At the special meeting of the stockholders of Baker Hughes, Baker Hughes stockholders will be asked to vote on (i) a proposal to adopt the merger agreement and thereby approve the merger, (ii) a proposal to adjourn

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Baker Hughes’s special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement, and (iii) a proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger (which we refer to as the “merger-related compensation proposal”). The merger cannot be completed unless the Baker Hughes stockholders vote to adopt the merger agreement.

Baker Hughes’s board of directors has reviewed and considered the terms of the merger and the merger agreement and has unanimously determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Baker Hughes and its stockholders and recommend that Baker Hughes stockholders vote (i) FOR the proposal to adopt the merger agreement and thereby approve the merger, (ii) FOR the proposal to adjourn the Baker Hughes special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement, and (iii) FOR the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger.

We estimate that Halliburton may issue up to approximately 490 million shares of its common stock to Baker Hughes stockholders as contemplated by the merger agreement. Immediately following completion of the merger, Halliburton stockholders immediately prior to the merger will own approximately 63% of Halliburton’s outstanding common stock and former Baker Hughes stockholders will own approximately 37% of Halliburton’s outstanding common stock. Halliburton common stock will continue to be listed on the NYSE under the symbol “HAL.”

We urge you to read the enclosed joint proxy statement/prospectus, which includes important information about the merger and our special meetings. In particular, see “Risk Factors” beginning on page 32 of the joint proxy statement/prospectus for a description of the risks that you should consider in evaluating the merger.

For a discussion of the United States federal income tax consequences of the merger, see “The Proposed Merger—Material United States Federal Income Tax Consequences of the Transaction” beginning on page 110 of the joint proxy statement/prospectus.

Your vote is very important. We cannot complete the merger unless (i) Halliburton stockholders approve the share issuance, and (ii) Baker Hughes stockholders adopt the merger agreement. Whether or not you expect to attend the special meeting of your company, the details of which are described in the enclosed joint proxy statement/prospectus, please immediately submit your proxy by telephone, by the Internet or by completing, signing, dating and returning your signed proxy card(s) in the enclosed prepaid return envelope.

If Halliburton stockholders have any questions or require assistance in voting their shares, they should call Innisfree M&A Incorporated (“Innisfree”) or MacKenzie Partners, Inc. (“MacKenzie”), Halliburton’s proxy solicitors for the special meeting, toll-free at (877) 825-8971 or (800) 322-2885, respectively. If Baker Hughes stockholders have any questions or require assistance in voting their shares, they should call D.F. King & Co., Inc. (“D.F. King”), Baker Hughes’s proxy solicitor for the special meeting, toll-free at (800) 735-3591.

 

Sincerely,		Sincerely,
David J. Lesar Chairman of the Board and Chief Executive Officer Halliburton Company		Martin S. Craighead Chairman of the Board and Chief Executive Officer Baker Hughes Incorporated

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger described in the joint proxy statement/prospectus or the securities to be issued pursuant to the merger under the joint proxy statement/prospectus or determined if the joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The enclosed joint proxy statement/prospectus is dated [                    ], 2015 and is first being mailed to stockholders on or about [                    ], 2015.

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REFERENCES TO ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates important business and financial information about Halliburton and Baker Hughes from other documents that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge. You can obtain copies of the documents incorporated by reference into this joint proxy statement/prospectus through the Securities and Exchange Commission (sometimes referred to as the SEC) website at www.sec.gov or by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

Halliburton Company 3000 North Sam Houston Parkway East Houston, Texas 77032 Investor Relations (281) 871-2688		Baker Hughes Incorporated 2929 Allen Parkway, Suite 2100 Houston, Texas 77019 Investor Relations (713) 439-8039

In addition, you may also obtain additional copies of this joint proxy statement/prospectus or the documents incorporated by reference into this joint proxy statement/prospectus by contacting Innisfree or MacKenzie, Halliburton’s proxy solicitors, or D.F. King, Baker Hughes’s proxy solicitor, at the addresses and telephone numbers listed below. You will not be charged for any of these documents that you request.

 

Innisfree M&A Incorporated 501 Madison Avenue New York, New York 10022 Toll-free: (877) 825-8971 Collect: (212) 750-5833		MacKenzie Partners, Inc. 105 Madison Avenue New York, New York 10016 Toll-free: (800) 322-2885 Collect: (212) 929-5500		D.F. King & Co. 48 Wall Street New York, New York 10005 Toll-free: (800) 735-3591 Collect: (212) 269-5550

To obtain timely delivery of documents, you must request them no later than five business days before the date of your meeting. Therefore, if you would like to request documents from Halliburton, please do so by March 20, 2015, in order to receive them before the Halliburton special meeting. If you would like to request documents from Baker Hughes, please do so by March 20, 2015, in order to receive them before the Baker Hughes special meeting.

See “Where You Can Find More Information” beginning on page 180 of this joint proxy statement/prospectus.

SUBMITTING PROXIES BY MAIL, TELEPHONE OR INTERNET

Halliburton stockholders of record may submit their proxies:

 

•

by internet until 11:59 p.m. Houston, Texas time on March 26, 2015;

 

•

by telephone until 11:59 p.m. Houston, Texas time on March 26, 2015; or

 

•

by completing, signing and returning your proxy or voting instruction card before March 27, 2015.

Baker Hughes stockholders of record may submit their proxies:

 

•

by telephone, by calling the phone number provided on the enclosed proxy card or voting instruction form, until 11:59 p.m. Houston, Texas time on March 26, 2015;

 

•

by accessing the Internet website provided on the enclosed proxy card or voting instruction form and following the instructions on the website by 11:59 p.m. Houston, Texas time on March 26, 2015; or

 

•

by mail, by indicating their voting preference on the proposals on each proxy card received, signing and dating each proxy card and returning each proxy card in the prepaid envelope that accompanied that proxy card before March 27, 2015.

Stockholders of Halliburton and/or Baker Hughes whose shares are held in “street name” must provide their broker, nominee, fiduciary or other custodian with instructions on how to vote their shares; otherwise, their broker, nominee, fiduciary or other custodian will not vote their shares on any of the proposals before the special meeting. Stockholders should check the voting form provided by their broker, nominee, fiduciary or other custodian for instructions on how to vote their shares.

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Halliburton Company

3000 North Sam Houston Parkway East

Houston, Texas 77032

(281) 871-2699

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD March 27, 2015

A Halliburton Company special meeting of stockholders will be held on March 27, 2015 at 9:00 a.m., local time, at 3000 North Sam Houston Parkway East, Life Center – Auditorium, Houston, Texas 77032. Our stockholders are asked to vote to:

1. Approve the issuance of shares of Halliburton common stock as contemplated by the Agreement and Plan of Merger (as it may be amended from time to time, the “merger agreement”), dated as of November 16, 2014, among Halliburton Company, Red Tiger LLC and Baker Hughes Incorporated. A copy of the merger agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice. In the merger, each share of Baker Hughes common stock outstanding immediately prior to completion of the merger (other than dissenting shares and shares held by Halliburton or Baker Hughes) will be converted into the right to receive 1.12 shares of Halliburton common stock and $19.00 in cash.

2. Adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares described in the foregoing proposal.

3. Transact any other business properly brought before the special meeting and any adjournment or postponement thereof.

If you held shares in Halliburton at the close of business on February 17, 2015, you are entitled to vote at the special meeting. If a new record date is set, you will be entitled to vote at the special meeting if you held shares in Halliburton as of such record date.

The Halliburton board of directors recommends that you vote FOR all of these proposals, which are described in detail in the accompanying joint proxy statement/prospectus. Your attention is directed to the accompanying joint proxy statement/prospectus for a discussion of the merger and the merger agreement, as well as the other matters that will be considered at the meeting.

Your vote is very important. The conditions to the merger include that the Halliburton stockholders approve the share issuance. If you do not submit your proxy by telephone, the Internet, or return your signed proxy card(s) by mail or vote in person at your special meeting, it will be more difficult for Halliburton to obtain the necessary quorum to hold its special meeting.

Whether or not you plan to attend the special meeting in person, please complete, sign, date and return the enclosed proxy in the accompanying self-addressed postage pre-paid envelope or complete your proxy by following the instructions supplied on the proxy card for voting by telephone or via the Internet (or, if your shares are held in “street name” by a broker, nominee, fiduciary or other custodian, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct it to vote your shares) as soon as possible. If you attend the special meeting, you may withdraw your proxy and vote in person.

 

Houston, Texas

[                    ], 2015

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Baker Hughes Incorporated

2929 Allen Parkway, Suite 2100

Houston, Texas 77019

(713) 439-8600

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD March 27, 2015

A Baker Hughes Incorporated special meeting of stockholders will be held on March 27, 2015, at 9:00 a.m., local time, at 2727 Allen Parkway, Wortham Meeting Room #2, Houston, Texas 77019, for the following purposes, all as set forth in the accompanying joint proxy statement/prospectus:

1. Adopt the Agreement and Plan of Merger (as it may be amended from time to time, the “merger agreement”), dated as of November 16, 2014, by and among Halliburton Company, Red Tiger LLC and Baker Hughes Incorporated. A copy of the merger agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice. In the merger, each share of Baker Hughes common stock outstanding immediately prior to completion of the merger (other than dissenting shares and shares held by Halliburton or Baker Hughes) will be converted into the right to receive 1.12 shares of Halliburton common stock and $19.00 in cash.

2. Approve the adjournment of the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

3. Approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger.

4. Transact any other business properly brought before the special meeting by or at the direction of the Board and any adjournment or postponement thereof.

Only stockholders of record on the books of Baker Hughes at the close of business on February 17, 2015 will be entitled to vote at the meeting. If a new record date is set, you will be entitled to vote at the special meeting if you held shares in Baker Hughes as of such record date. These items of business, including the merger agreement and the proposed merger, are described in detail in the accompanying joint proxy statement/prospectus.

The Baker Hughes board of directors, by unanimous vote of the directors, determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger between Baker Hughes and a subsidiary of Halliburton, are advisable and in the best interests of Baker Hughes and its stockholders and recommends that Baker Hughes stockholders vote FOR the adoption of the merger agreement, FOR the adjournment of the Baker Hughes special meeting if necessary or advisable to solicit additional proxies in favor of such adoption and FOR the merger-related compensation proposal.

Your vote is very important. Adoption of the merger agreement by the Baker Hughes stockholders is a condition to the merger and requires the affirmative vote, in person or by proxy, of holders of a majority of the shares of Baker Hughes common stock outstanding and entitled to vote on such proposal. Therefore, your vote is very important. Your abstaining, failure to submit a proxy or vote in person at the special meeting, or failure to provide your broker, nominee, fiduciary or other custodian, as applicable, with instructions on how to vote your shares will have the same effect as a vote against the adoption of the merger agreement.

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Whether or not you plan to attend the special meeting, please promptly submit your proxy by telephone or by accessing the internet site following the instructions in the accompanying joint proxy statement/prospectus or by marking, dating, signing and returning the accompanying proxy card in the self-addressed postage pre-paid envelope as promptly as possible. If you attend the special meeting, you may withdraw your proxy and vote in person.

By Order of the Board of Directors

M. Lee Whitley

Vice President and Corporate Secretary

Houston, Texas

[                    ], 2015

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		Page
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS			1
SUMMARY			11
The Companies Involved in the Merger			11
The Proposed Merger			11
Merger Consideration			12
Halliburton Stockholders Will Not Have Appraisal Rights in Connection with the Merger			12
Baker Hughes Stockholders Will Have Appraisal Rights in Connection with the Merger			12
Treatment of Baker Hughes Equity Incentive Awards			13
Dividends			14
Material United States Federal Income Tax Consequences of the Transaction			14
The Halliburton and Baker Hughes Special Meetings			15
Approvals Required by Halliburton and Baker Hughes Stockholders to Complete the Merger			15
Recommendations of the Halliburton Board			16
Recommendations of the Baker Hughes Board			16
Opinions of Halliburton’s Financial Advisors			16
Opinion of Baker Hughes’s Financial Advisor			17
Debt Financing			18
Completion of the Merger is Subject to Regulatory Approvals			18
Interests of Baker Hughes Directors and Executive Officers			19
Completion of the Merger is Subject to a Number of Conditions			19
No Solicitation of Alternative Transactions			20
Termination Fees and Expenses May Be Payable Under Some Circumstances in the Event that the Merger Agreement is Terminated by Halliburton or Baker Hughes			20
Specific Performance; Remedies			23
Halliburton Common Stock Will Continue to be Listed on the New York Stock Exchange; Baker Hughes Stock Will be Delisted and Deregistered if the Merger is Completed			23
Former Baker Hughes Stockholders Will Hold Approximately 37% of the Outstanding Shares of Halliburton Common Stock Following Completion of the Merger			23
Differences Exist Between the Rights of Halliburton Stockholders and Baker Hughes Stockholders			23
The Merger and the Performance of the Combined Company Are Subject to a Number of Risks			23
Post-Merger Governance and Management			23
Litigation Relating to the Merger			24
Recent Developments of Halliburton			24
Recent Developments of Baker Hughes			25

 

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		Page
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF HALLIBURTON			26
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BAKER HUGHES			27
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			28
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA COMBINED PER SHARE INFORMATION			29
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION			30
RISK FACTORS			31
Risks Relating to the Merger			31
Risks Relating to Halliburton Following the Merger			36
Risks Relating to Halliburton Common Stock Following the Merger			39
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			40
THE COMPANIES			41
Halliburton Company			41
Red Tiger LLC			41
Baker Hughes Incorporated			41
INFORMATION ABOUT THE HALLIBURTON SPECIAL MEETING AND VOTE			43
Date, Time and Place of Halliburton Special Meeting			43
Matters to be Considered			43
Halliburton Record Date; Quorum; and Voting Rights			43
Required Vote			43
Broker Non-Votes			44
Abstentions; Not Voting			44
Appraisal Rights			44
Shares Beneficially Owned by Halliburton Directors and Officers			45
How Shares are Voted; Proxies			45
Revocation of Proxies			45
Solicitation of Proxies			46
Other Business; Adjournments			46
Halliburton Stockholder Account Maintenance			46
INFORMATION ABOUT THE BAKER HUGHES SPECIAL MEETING AND VOTE			47
Date, Time and Place of Baker Hughes Special Meeting			47
Matters to be Considered			47
Baker Hughes Record Date; Quorum; and Voting Rights			47
Required Vote			48
Broker Non-Votes			48

 

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		Page
Abstentions; Not Voting			48
Appraisal Rights			49
Shares Beneficially Owned by Baker Hughes Directors and Officers			49
How Shares are Voted; Proxies			49
Revocation of Proxies			50
Solicitation of Proxies			50
Other Business; Adjournments			51
Baker Hughes Stockholder Account Maintenance			51
THE PROPOSED MERGER			52
General			52
Halliburton Merger Proposal			52
Baker Hughes Merger Proposal			52
Merger Consideration			52
Background of the Merger			53
Recommendation of the Halliburton Board and its Reasons for the Merger			72
Opinions of Halliburton’s Financial Advisors			75
Recommendation of the Baker Hughes Board and its Reasons for the Merger			93
Opinion of Baker Hughes’s Financial Advisor			97
Forward-Looking Financial Information			104
Accounting Treatment			109
Material United States Federal Income Tax Consequences of the Transaction			109
Regulatory Matters Relating to the Merger			112
Appraisal Rights			115
Federal Securities Laws Consequences; Stock Transfer Restrictions			115
Stock Exchange Listing; Delisting and Deregistration of Baker Hughes’s Common Stock; Shares to be Issued in the Merger			115
Litigation Relating to the Merger			116
ADDITIONAL INTERESTS OF BAKER HUGHES’S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER			117
Leadership of the Combined Company			117
Stock Options and Other Equity and Long-Term Incentive Awards			117
Non-Employee Directors			117
Executive Officers			118
Deferred Compensation—“Single Trigger” Vesting			118
Annual Bonuses—“Single Trigger” Payment			118
Severance Arrangements			118
Executive Officers Other than Mr. Esparza			119
Retention Awards			121
Indemnification and Insurance			121
Golden Parachute Compensation			122
Baker Hughes Proposal to Approve Merger-Related Compensation of Named Executive Officers			126

 

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		Page
THE MERGER AGREEMENT			127
The Merger			127
Completion and Effectiveness of the Merger			127
Merger Consideration			127
Treatment of Baker Hughes Equity Incentive Awards			129
Fractional Shares			130
Conversion of Shares; Exchange of Certificates			130
Representations and Warranties			131
Definition of Material Adverse Effect			133
Conditions to the Completion of the Merger			133
Conduct of Businesses Pending the Merger			134
Additional Agreements			138
Termination of the Merger Agreement and Termination Fees			146
Effect of Termination			148
No Third Party Beneficiaries			149
Expenses			149
Amendment			149
Waiver			149
Governing Law and Dispute Resolution			149
POST-MERGER GOVERNANCE AND MANAGEMENT			150
Corporate Offices			150
Board of Directors of Halliburton			150
Dividends			150
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS			151
COMPARISON OF STOCKHOLDERS’ RIGHTS			161
APPRAISAL RIGHTS OF BAKER HUGHES STOCKHOLDERS			168
DESCRIPTION OF HALLIBURTON’S DEBT FINANCING			172
DESCRIPTION OF CAPITAL STOCK			173
Common Stock			173
Preferred Stock			173
Anti-Takeover Provisions			174
Transfer Agent and Registrar			175
EXPERTS			176
Halliburton			176

 

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		Page
Baker Hughes			176
HOUSEHOLDING			176
Halliburton			176
Baker Hughes			176
LEGAL MATTERS			177
FUTURE STOCKHOLDER PROPOSALS			178
Halliburton			178
Baker Hughes			178
OTHER MATTERS			178
WHERE YOU CAN FIND MORE INFORMATION			179

 

Annexes
Annex A		Agreement and Plan of Merger
Annex B		Section 262 of the General Corporation Law of the State of Delaware
Annex C		Opinion of Credit Suisse Securities (USA) LLC
Annex D		Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
Annex E		Opinion of Goldman, Sachs & Co.

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS

Q: Why am I receiving this document?

A: This document is being delivered to you because you are either a stockholder of Halliburton Company (sometimes referred to as Halliburton), a stockholder of Baker Hughes Incorporated (sometimes referred to as Baker Hughes), or both. Halliburton and Baker Hughes are each holding a special meeting in connection with the proposed merger of Baker Hughes into a wholly owned subsidiary of Halliburton (sometimes referred to as the merger).

Halliburton stockholders are being asked to approve at a special meeting the issuance of shares of Halliburton common stock as contemplated by the Agreement and Plan of Merger (as it may be amended from time to time, sometimes referred to as the merger agreement), dated as of November 16, 2014, by and among Halliburton, Red Tiger LLC (sometimes referred to herein as “Merger Sub”) and Baker Hughes, and a proposal to adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares. Baker Hughes stockholders are being asked to adopt at a special meeting the merger agreement, and thereby approve the merger, and proposals to adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement and to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger. The approval of the issuance of shares of Halliburton common stock is sometimes referred to as the Halliburton stockholder approval, and the adoption of the merger agreement by Baker Hughes stockholders, thereby approving the merger, is sometimes referred to as the Baker Hughes stockholder approval.

This document is serving as both a joint proxy statement of Halliburton and Baker Hughes and a prospectus of Halliburton. It is a joint proxy statement because it is being used by each of the boards of directors of Halliburton and Baker Hughes to solicit proxies from their respective stockholders. It is a prospectus because Halliburton is offering shares of its common stock and cash in exchange for shares of Baker Hughes common stock if the merger is completed. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus.

Q: What will happen in the merger?

A: In the merger, Baker Hughes will merge with and into Merger Sub. Merger Sub will be the surviving entity in the merger as a wholly owned subsidiary of Halliburton. Baker Hughes will cease to be a publicly held corporation following completion of the merger.

Q: What will Baker Hughes stockholders receive in the merger for their shares?

A: When the merger is completed, each share of Baker Hughes common stock outstanding immediately prior to the merger (other than dissenting shares and shares held by Halliburton or Baker Hughes) will be converted automatically into the right to receive 1.12 shares of Halliburton common stock plus $19.00 in cash. The exchange ratio to be used in connection with the merger is fixed and will not be adjusted to reflect changes in the price of Halliburton or Baker Hughes common stock prior to the closing of the merger. No fractional shares of Halliburton common stock will be issued. Holders of Baker Hughes common stock to whom fractional shares would have otherwise been issued will be entitled to receive, subject to applicable withholding, a cash payment in lieu of such fraction based on the volume-weighted average price per share of Halliburton common stock over the five trading day period ending on the third full trading day prior to the effective time of the merger. See “Risk Factors” beginning on page 32 of this joint proxy statement/prospectus.

 

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Q: What do I need to do now?

A: After you carefully read this joint proxy statement/prospectus, please respond by submitting your proxy by telephone, by the Internet or by completing, signing, dating and returning your signed proxy card(s) in the enclosed prepaid return envelope(s), as soon as possible, so that your shares may be represented at your special meeting. If you hold your shares in “street name” through a broker, nominee, fiduciary or other custodian, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct them to vote your shares. In order to ensure that your vote is recorded, please submit your proxy as instructed on your proxy card(s) even if you currently plan to attend your special meeting in person.

Q: Who is entitled to vote at the Halliburton special meeting?

A: All holders of Halliburton common stock who held shares at the record date for the Halliburton special meeting (the close of business on February 17, 2015) are entitled to receive notice of, and to vote at, the Halliburton special meeting provided that those shares remain outstanding on the date of the Halliburton special meeting. As of the close of business on February 12, 2015, there were 849,655,046 shares of Halliburton common stock outstanding. Each holder of Halliburton common stock is entitled to one vote for each share of Halliburton common stock owned at the record date.

Q: Who is entitled to vote at the Baker Hughes special meeting?

A: All holders of Baker Hughes common stock who held shares at the record date for the Baker Hughes special meeting (the close of business on February 17, 2015) are entitled to receive notice of, and to vote at, the Baker Hughes special meeting provided that those shares remain outstanding on the date of the Baker Hughes special meeting. As of the close of business on February 12, 2015, there were 434,490,814 shares of Baker Hughes common stock outstanding. Each holder of Baker Hughes common stock is entitled to one vote for each share of Baker Hughes common stock owned at the record date.

Q: Why is my vote important?

A: If you do not submit your proxy by telephone, the Internet, or return your signed proxy card(s) by mail or vote in person at your special meeting, it will be more difficult for Halliburton and Baker Hughes to obtain the necessary quorum to hold their respective special meetings and to obtain the stockholder approvals necessary for the completion of the merger. For the Halliburton special meeting, the presence, in person or by proxy, of holders of a majority of the Halliburton common stock issued and outstanding and entitled to vote at the Halliburton special meeting constitutes a quorum for the transaction of business. For the Baker Hughes special meeting, the presence, in person or by proxy, of holders of a majority of the Baker Hughes common stock issued and outstanding and entitled to vote at the Baker Hughes special meeting constitutes a quorum for the transaction of business. If a quorum is not present at the Halliburton special meeting or the Baker Hughes special meeting, the stockholders of that company will not be able to take action on any of the proposals at that meeting.

While a failure to submit a proxy or vote in person at the special meeting, or a failure to provide your broker, nominee, fiduciary or other custodian, as applicable, with instructions on how to vote your shares will not affect the outcome of the vote on the proposal to approve the issuance of shares of Halliburton common stock, it will make it more difficult to meet the requirement under Halliburton’s by-laws that the holders of a majority of the Halliburton common stock issued and outstanding and entitled to vote at the special meeting be present in person or by proxy to constitute a quorum at the special meeting.

For the Baker Hughes proposal to adopt the merger agreement, a majority of the outstanding shares entitled to vote on such matter must approve such proposal, thus an abstention from voting, a failure to submit a proxy or vote in person at the special meeting, or a failure to provide your broker, nominee, fiduciary or other custodian, as applicable, with instructions on how to vote your shares will have the same effect as a vote AGAINST the proposal.

 

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Your vote is very important. Halliburton and Baker Hughes cannot complete the merger unless (i) Halliburton stockholders approve the share issuance and (ii) Baker Hughes stockholders adopt the merger agreement.

Q: Why have Halliburton and Baker Hughes agreed to the merger?

A: Halliburton and Baker Hughes believe that the merger will create a leading oilfield services company and expect the merger to provide substantial strategic and financial benefits to their stockholders, customers and other stakeholders worldwide, including, among others:

 

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Unsurpassed breadth and depth of products and services.

 

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Significant annual cost synergies once fully integrated.

 

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Increased operating efficiencies and opportunities to become the most efficient and lowest cost service provider.

 

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Accretive to Halliburton cash flow per share by end of first calendar year after closing.

 

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Accretive to earnings per share by end of second calendar year after closing.

 

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Combined company well-positioned for continued superior growth, margins and returns.

In particular, Halliburton estimates that the merger would result in nearly $2 billion of annual cost synergies upon full integration of Baker Hughes. Additional information on the reasons for the merger can be found below, beginning on page 73 for Halliburton and on page 93 for Baker Hughes.

Q: When do you expect the merger to be completed?

A: Halliburton and Baker Hughes hope to complete the merger as soon as reasonably practicable, subject to receipt of necessary regulatory approvals and the stockholder approvals, which are the subject of the Halliburton and Baker Hughes special meetings. Halliburton and Baker Hughes currently expect that the transaction will be completed in the second half of 2015. However, Halliburton and Baker Hughes cannot predict when regulatory review will be completed, whether or when regulatory or stockholder approval will be received or the potential terms and conditions of any regulatory approval that is received. In addition, certain other conditions to the merger, some of which are outside of the control of Halliburton and Baker Hughes, may not be satisfied until 2016 or at all. For a discussion of the conditions to the completion of the merger and of the risks associated with obtaining regulatory approvals in connection with the merger, see “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 133 and “The Proposed Merger—Regulatory Matters Relating to the Merger” beginning on page 112.

Q: Will the merger be taxable to stockholders of Baker Hughes?

A: Halliburton and Baker Hughes expect that the merger will qualify as a “reorganization” for United States federal income tax purposes within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), and that each of Halliburton and Baker Hughes will be a party to the “reorganization,” and it is a condition to the consummation of the merger that each of Halliburton and Baker Hughes receive an opinion from legal counsel to that effect. Accordingly, a U.S. person that is the beneficial owner of Baker Hughes common stock generally will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount of cash received in the transaction, excluding any cash received in lieu of a fractional share of Halliburton common stock (which is discussed below in “The Proposed Merger—Material United States Federal Income Tax Consequences of the Transaction”), and (ii) the excess, if any, of (a) the sum of the amount of such cash and the fair market value of the Halliburton common stock received in the transaction over (b) the owner’s tax basis in its shares of Baker Hughes common stock. Any gain recognized generally will be long-term capital gain if, as of the date of the merger, the shares of Baker Hughes common stock exchanged in the transaction were held for more than one year.

 

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Subject to certain exceptions, which are described below in “The Proposed Merger—Material United States Federal Income Tax Consequences of the Transaction,” a non-U.S. person that is a beneficial owner of Baker Hughes common stock generally will not be subject to U.S. federal income tax on gain realized, if any, on the exchange of shares in the merger.

Baker Hughes stockholders are urged to read the discussion in the section entitled “The Proposed Merger—Material United States Federal Income Tax Consequences of the Transaction” beginning on page 110 of this joint proxy statement/prospectus and to consult their tax advisors as to the United States federal income tax consequences of the transaction, as well as the effects of state, local and non-United States tax laws.

Q: How will my proxy be voted?

A: If you submit your proxy by telephone, by the Internet or by completing, signing, dating and returning your signed proxy card(s), your proxy will be voted in accordance with your instructions. If other matters are properly brought before the special meetings, or any adjournments of the meetings, your proxy includes discretionary authority on the part of the individuals appointed to vote your shares to act on those matters according to their best judgment.

Q: May I vote in person?

A: Yes. If you hold shares directly in your name as a stockholder of record of Halliburton common stock as of the close of business on February 17, 2015, or of Baker Hughes common stock as of the close of business on February 17, 2015, you may attend your special meeting and vote your shares in person, instead of submitting your proxy by telephone, by the Internet or returning your signed proxy card(s) by mail. If you hold shares of Halliburton common stock or Baker Hughes common stock in “street name,” meaning through a broker, nominee, fiduciary or other custodian, you must obtain a legal proxy from that institution and present it to the inspector of election with your ballot to be able to vote in person at the Halliburton or Baker Hughes special meeting. To request a legal proxy, please contact your broker, nominee, fiduciary or other custodian. Halliburton and Baker Hughes highly recommend that you vote in advance by submitting your proxy by telephone, by the Internet or by mail, even if you plan to attend the special meeting of your company.

Q: What are the votes required to approve the proposals?

A: Halliburton.

 

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Approval of the proposal respecting the issuance of shares of Halliburton common stock as contemplated by the merger agreement requires the affirmative vote of a majority of votes cast at the Halliburton special meeting by holders of Halliburton common stock.

 

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Approval of the proposal respecting the adjournment of the Halliburton stockholders meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares requires the affirmative vote of the holders of a majority of the shares of Halliburton common stock represented at the Halliburton special meeting and entitled to vote on such proposal.

Baker Hughes.

 

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Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the shares of Baker Hughes common stock outstanding and entitled to vote on such proposal.

 

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Approval of the proposal respecting the adjournment of the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement requires the affirmative vote of the holders of a majority of the

 

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shares of Baker Hughes common stock represented at the Baker Hughes special meeting and entitled to vote on such proposal if a quorum is present, and a majority of the voting stock represented in person or by proxy if a quorum is not present.

 

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Approval, on a non-binding, advisory basis, of the merger-related compensation proposal requires the affirmative vote of the holders of a majority of the shares of Baker Hughes common stock represented at the Baker Hughes special meeting and entitled to vote on such proposal.

Q: What constitutes a quorum for the Halliburton special meeting?

A: A quorum is the number of shares that must be represented at a meeting to lawfully conduct business. The presence at the special meeting, in person or by proxy, of the holders of a majority of the Halliburton common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business. Abstentions and broker non-votes, if any, will be included in the calculation of the number of shares considered to be present at the Halliburton special meeting for purposes of determining a quorum.

Q: What constitutes a quorum for the Baker Hughes special meeting?

A: A quorum is the number of shares that must be represented at a meeting to lawfully conduct business. The presence at the special meeting, in person or by proxy, of the holders of a majority of the shares of Baker Hughes common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business. Abstentions and broker non-votes, if any, will be included in the calculation of the number of shares considered to be present at the meeting for quorum purposes.

Q: Does Halliburton’s board of directors recommend that Halliburton stockholders approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement?

A: Yes. The board of directors of Halliburton has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and determined that the issuance of shares of Halliburton common stock as contemplated by the merger agreement is in the best interests of Halliburton. Therefore, the board of directors of Halliburton unanimously recommends that you vote FOR the proposal respecting the issuance of shares of Halliburton common stock as contemplated by the merger agreement at the Halliburton special meeting. See “The Proposed Merger—Recommendation of the Halliburton Board and its Reasons for the Merger” beginning on page 73 of this joint proxy statement/prospectus.

Q: Does Baker Hughes’s board of directors recommend that Baker Hughes stockholders adopt the merger agreement and the transactions contemplated thereby?

A: Yes. The board of directors of Baker Hughes has unanimously approved the merger agreement and the transactions contemplated thereby, including the merger, and determined that these transactions are advisable and in the best interests of Baker Hughes and its stockholders. Therefore, the board of directors of Baker Hughes unanimously recommends that you vote FOR the proposal to adopt the merger agreement and the transactions contemplated thereby at the Baker Hughes special meeting. See “The Proposed Merger—Recommendation of the Baker Hughes Board and its Reasons for the Merger” beginning on page 93 of this joint proxy statement/prospectus. In considering the recommendation of the board of directors of Baker Hughes with respect to the merger agreement and the transactions contemplated thereby, including the merger, you should be aware that directors and executive officers of Baker Hughes are parties to agreements or participants in other arrangements that give them interests in the merger that may be different from, or in addition to, your interests as a stockholder of Baker Hughes. You should consider these interests in voting on this proposal. These different interests are described under “Additional Interests of Baker Hughes’s Directors and Executive Officers in the Merger” beginning on page 117 of this joint proxy statement/prospectus.

 

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Q: What happens if Halliburton stockholders fail to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement?

A: In this circumstance, either party is permitted to terminate the merger agreement and in the event of such termination, Halliburton is required to pay a termination fee of $1.5 billion to Baker Hughes. See “The Merger Agreement—Termination of the Merger Agreement and Termination Fees” beginning on page 147 of this joint proxy statement/prospectus.

Q: What happens if Baker Hughes stockholders fail to adopt the merger agreement and the transactions contemplated thereby?

A: In this circumstance, either party is permitted to terminate the merger agreement and in the event of such termination, under specified circumstances, Baker Hughes may be required to pay up to $40 million of Halliburton’s expenses or may be required to pay a termination fee of $1.0 billion to Halliburton. See “The Merger Agreement—Termination of the Merger Agreement and Termination Fees” beginning on page 147 of this joint proxy statement/prospectus.

Q: If I am a record holder of my shares, what happens if I abstain from voting (whether by returning my proxy card or submitting my proxy by telephone or via the Internet) or I don’t submit a proxy?

A: Halliburton.

 

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For the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement, if you abstain on the proposal, your shares will be counted as a vote cast, and, therefore, will have the same effect as a vote AGAINST such proposal. A failure to submit a proxy is not counted as a vote cast, and as such, will not otherwise have an effect on the outcome of the vote for the proposal, but it will make it more difficult to meet the requirement under Halliburton’s by-laws that the holders of a majority of the Halliburton common stock issued and outstanding and entitled to vote at the special meeting be present in person or by proxy to constitute a quorum at the special meeting.

 

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For the proposal to adjourn the Halliburton special meeting, if necessary or advisable, an abstention will have the same effect as a vote cast AGAINST such proposal. A failure to submit a proxy will not have an effect on the outcome of the vote for the proposal.

Baker Hughes.

 

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For the proposal to adopt the merger agreement, an abstention or a failure to submit a proxy will have the same effect as a vote AGAINST such proposal.

 

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For the proposal to adjourn the Baker Hughes special meeting, if necessary or advisable, an abstention will have the same effect as a vote cast AGAINST such proposal. A failure to submit a proxy will not have an effect on the outcome of the vote for the proposal.

 

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For the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger, an abstention will have the same effect as a vote cast AGAINST such proposal. A failure to submit a proxy will not have an effect on the outcome of the vote for the proposal.

Q: What will happen if I return my proxy card without indicating how to vote?

 

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A: If you are a Halliburton stockholder of record and submit your proxy but do not make specific choices, your proxy will follow the Halliburton Board’s recommendations and your shares will be voted FOR the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement and FOR the proposal to adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares.

 

 

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If you are a Baker Hughes stockholder of record and submit your proxy but do not make specific choices with respect to the proposals, your proxy will follow the Baker Hughes Board’s recommendations and your shares will be voted FOR the proposal to adopt the merger agreement (under such circumstances, your proxy will constitute a waiver of your right of appraisal under Section 262 and will nullify any previously delivered written demand for appraisal under Section 262), FOR the proposal to adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement and FOR the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger.

Q: What if I fail to instruct my broker how to vote? Will my broker automatically vote my shares for me?

A: Under the listing requirements of the New York Stock Exchange (sometimes referred to as the NYSE), brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters that the NYSE determines to be “non-routine.” Accordingly, a broker non-vote occurs when the broker is not permitted to vote on an item without instruction from the beneficial owner of shares of common stock and the beneficial owner gives no instruction as to voting of the shares.

Halliburton. Under NYSE rules, your broker or bank does not have discretionary authority to vote your shares on the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement or the proposal to adjourn the Halliburton special meeting, if necessary or advisable. Therefore, if you are a Halliburton stockholder and you do not instruct your broker on how to vote your shares:

 

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your broker may not vote your shares on the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement, which broker non-votes will have no effect on the vote on this proposal; and

 

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your broker may not vote your shares on the proposal to adjourn Halliburton’s special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares, which will have no effect on the outcome of the proposal.

Baker Hughes. Under NYSE rules, your broker or bank does not have discretionary authority to vote your shares on the proposal to adopt the merger agreement, the proposal to adjourn the Baker Hughes special meeting, if necessary or advisable, or the merger-related compensation proposal. Therefore, if you are a Baker Hughes stockholder and you do not instruct your broker on how to vote your shares:

 

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your broker may not vote your shares on the proposal to adopt the merger agreement, which broker non-votes will have the same effect as a vote AGAINST such proposal;

 

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your broker may not vote your shares on the proposal to adjourn Baker Hughes’s special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement, which broker non-votes will have no effect on the outcome of the proposal if a quorum is present, and will have the same effect as a vote AGAINST such proposal if a quorum is not present; and

 

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your broker may not vote your shares on the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger, which broker non-votes will have no effect on the outcome of the proposal.

 

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See “Information About the Halliburton Special Meeting and Vote—Broker Non-Votes” beginning on page 45, and “Information About the Baker Hughes Special Meeting and Vote—Broker Non-Votes” beginning on page 49, for more detail on the impact of a broker non-vote.

Q: What if my shares are held in “street name”?

A: If some or all of your shares of Halliburton and/or Baker Hughes are held in “street name” by your broker, nominee, fiduciary or other custodian, you must provide your broker, nominee, fiduciary or other custodian with instructions on how to vote your shares; otherwise, your broker, nominee, fiduciary or other custodian will not be able to vote your shares on any of the proposals before your company’s special meeting.

As a result of the foregoing, please be sure to provide your broker, nominee, fiduciary or other custodian with instructions on how to vote your shares. Please check the voting form used by your broker, nominee, fiduciary or other custodian to see if it offers telephone or Internet submission of proxies.

Q: What happens if I sell my shares after the record date but before the special meeting?

A: The record date for the Halliburton special meeting (the close of business on February 17, 2015) is earlier than the date of the Halliburton special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer shares of Halliburton common stock after the record date but before the date of the Halliburton special meeting, you will retain your right to vote those shares at the Halliburton special meeting.

The record date for the Baker Hughes special meeting (the close of business on February 17, 2015) is earlier than the date of the Baker Hughes special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer shares of Baker Hughes common stock after the record date but before the date of the Baker Hughes special meeting, you will retain your right to vote those shares at the Baker Hughes special meeting. However, you will not have the right to receive the merger consideration in respect of those shares. In order to receive the merger consideration, you must hold your shares through completion of the merger.

Q: Who will count the votes?

A: For the Halliburton proposals, the inspector of elections will count all the proxies or ballots submitted and report the preliminary votes at the special meeting. Whether you vote your shares by Internet, telephone or mail, your vote will be received by Computershare Shareowner Services LLC.

For the Baker Hughes proposals, the inspector of elections will count all the proxies or ballots submitted and report the preliminary votes at the special meeting. Whether you vote your shares by Internet, telephone or mail, your vote will be received by Computershare Shareowner Services LLC.

Q: What does it mean if I receive more than one set of materials?

A: This means you own shares of both Halliburton and Baker Hughes or you own shares of Halliburton or Baker Hughes that are registered under different names or held in different brokerage accounts. For example, you may own some shares directly as a stockholder of record and other shares through a broker or you may own shares through more than one broker. In these situations, you may receive multiple sets of proxy materials. It is necessary for you to vote, sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the proxy cards you receive in order to vote all of the shares you own. Each proxy card you receive will come with its own prepaid return envelope; if you submit your proxy by mail, make sure you return each proxy card in the return envelope which accompanied that proxy card.

 

 

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Q: Can I revoke my proxy and change my vote?

A: Yes. You have the right to revoke your proxy at any time prior to the time your shares are voted at your special meeting. If you are a stockholder of record, your proxy can be revoked in several ways:

 

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by submitting a new proxy by telephone or the Internet before 11:59 p.m. Houston, Texas time on March 26, 2015;

 

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by delivering a written revocation to your company’s Corporate Secretary prior to the special meeting;

 

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by submitting another valid proxy bearing a later date that is received prior to the special meeting; or

 

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by attending your special meeting and voting your shares in person.

However, if your shares are held in “street name” through a broker, nominee, fiduciary or other custodian, you must check with your broker, nominee, fiduciary or other custodian to determine how to revoke your proxy.

Q: When and where are the special meetings?

A: The Halliburton special meeting will take place on March 27, 2015, at 9:00 a.m., local time, at 3000 N. Sam Houston Parkway East, Life Center – Auditorium, Houston, Texas 77032. The Baker Hughes special meeting will take place on March 27, 2015, at 9:00 a.m., local time, at 2727 Allen Parkway, Wortham Meeting Room #2, Houston, Texas 77019.

Q: Who can attend the special meetings? What must I bring to attend the special meetings?

A: Admittance to the Halliburton special meeting will require a valid photo identification, such as a driver’s license or passport. Attendance at the meeting will be limited to stockholders of record as of the record date and one guest per stockholder, and to guests of Halliburton. Stockholders whose shares are held in “street name” by a broker, nominee, fiduciary or other custodian should bring with them a copy of a brokerage statement reflecting stock ownership as of the record date, together with a valid photo identification. If you want to vote your shares of Halliburton common stock held in “street name” in person at the Halliburton special meeting, you will have to obtain a legal proxy in your name from the broker, nominee, fiduciary or other custodian who holds your shares.

Admittance to the Baker Hughes special meeting will require the admission ticket that is attached to your proxy (or other proof of stock ownership) and a valid photo identification. Attendance at the meeting will be limited to stockholders of record as of the record date and one guest per stockholder, and to guests of Baker Hughes. Stockholders whose shares are held in “street name” by a broker, nominee, fiduciary or other custodian should bring with them evidence of share ownership, such as a recent brokerage account or bank statement, together with a valid photo identification. If you want to vote your shares of Baker Hughes common stock held in “street name” in person at the Baker Hughes special meeting, you will have to obtain a legal proxy in your name from the broker, nominee, fiduciary or other custodian who holds your shares.

Q: Am I entitled to exercise appraisal rights instead of receiving the per share merger consideration for my shares of Baker Hughes common stock?

A: Baker Hughes stockholders are entitled to appraisal rights under Section 262 of the Delaware General Corporation Law, which we refer to as the DGCL, provided they fully comply with and follow the procedures and satisfy the conditions set forth in Section 262 of the DGCL. For more information regarding appraisal rights, see the section entitled “Appraisal Rights of Baker Hughes Stockholders” beginning on page 169 of this joint proxy statement/prospectus. In addition, a copy of Section 262 of the DGCL is attached as Annex B to this joint proxy statement/prospectus. Failure to comply with Section 262 of the DGCL will result in your waiver of, or inability to exercise, appraisal rights.

 

 

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Q: Should I send in my Baker Hughes stock certificates now?

A: No. After the merger is completed, Halliburton will send former Baker Hughes stockholders written instructions for exchanging their Baker Hughes stock certificates for stock certificates of Halliburton. Halliburton stockholders will keep their existing stock certificates.

Q: Are there risks that I, as a Halliburton stockholder, should consider in deciding to vote on the issuance of shares of Halliburton common stock as contemplated by the merger agreement or, as a Baker Hughes stockholder, should consider in deciding to vote on the adoption of the merger agreement?

A: Yes. In evaluating the issuance of shares of Halliburton common stock as contemplated by the merger agreement, or the adoption of the merger agreement and approval of the merger, you should carefully read this joint proxy statement/prospectus, including the factors discussed in the section entitled “Risk Factors” beginning on page 32 of this joint proxy statement/prospectus.

Q: Who can answer any questions I may have about the special meetings or the merger?

A: Halliburton stockholders may call Innisfree or MacKenzie, Halliburton’s proxy solicitors for the special meeting, toll-free at (877) 825-8971 or (800) 322-2885, respectively. Baker Hughes stockholders may call D.F. King, Baker Hughes’s proxy solicitor for the special meeting, toll-free at (800) 735-3591.

 

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RISK FACTORS

In addition to the other information included or incorporated by reference in this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 41, you should carefully consider the following risks before deciding how to vote. In addition, you should read and consider the risks associated with each of the businesses of Baker Hughes and Halliburton because those risks will also affect the combined company. These risks can be found under the caption, “Risk Factors” in Part I, Item 1A of the Annual Reports on Form 10-K for the fiscal year ended December 31, 2013 for each of Baker Hughes and Halliburton, filed with the SEC on February 12 and February 7, 2014, respectively, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which are incorporated by reference into this joint proxy statement/prospectus. You should also read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 180.

Risks Relating to the Merger

The exchange ratio is fixed and will not be adjusted in the event of any change in either Baker Hughes’s or Halliburton’s stock price. As a result, Baker Hughes stockholders cannot be sure at the time they vote on the merger of the value of the merger consideration they will receive or the value of the Baker Hughes common stock they will give up.

Upon the closing of the merger, each share of Baker Hughes common stock (other than dissenting shares as described in “Appraisal Rights of Baker Hughes Stockholders” and other than shares held in Baker Hughes’s treasury or owned by Halliburton or any subsidiary of Baker Hughes or Halliburton, which will be cancelled for no consideration) will be converted into the right to receive 1.12 shares of Halliburton common stock and $19.00 in cash, with cash paid in lieu of fractional shares. This exchange ratio is fixed in the merger agreement and will not be adjusted for changes in the market price of either Baker Hughes common stock or Halliburton common stock. Changes in the price of Halliburton common stock prior to the merger will affect the market value that Baker Hughes stockholders will become entitled to receive on the date of the merger. Neither party is permitted to “walk away” from the merger, terminate the merger agreement or resolicit the vote of its stockholders solely because of changes in the market price of either party’s common stock. Stock price changes may result from a variety of factors (many of which are beyond Baker Hughes’s or Halliburton’s control), including the following factors:

 

•

changes in Baker Hughes’s and Halliburton’s respective business, operations and prospects;

 

•

changes in market assessments of the business, operations and prospects of either company;

 

•

market assessments of the likelihood that the merger will be completed, including related considerations regarding regulatory approvals of the merger;

 

•

interest rates, general market, industry and economic conditions and other factors generally affecting the price of Baker Hughes’s and Halliburton’s common stock, including sales prices for oil and gas; and

 

•

federal, state and local legislation, governmental regulation and legal developments in the businesses in which Baker Hughes and Halliburton operate.

The price of Halliburton common stock at the closing of the merger may vary from its price on the date the merger agreement was executed, on the date of this joint proxy statement/prospectus and on the date of the Baker Hughes or Halliburton special meetings. As a result, the market value represented by the exchange ratio will also vary. For example, based on the range of closing prices of Halliburton common stock during the period from November 12, 2014 (the last trading day before various news outlets began reporting on a possible transaction between Baker Hughes and Halliburton) through February 12, 2015 (the most recent practicable trading day

 

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before the date of this joint proxy statement/prospectus), the exchange ratio represented a market value ranging from a low of $60.81 to a high of $80.69 for each share of Baker Hughes common stock.

Because the date that the merger is completed will be later than the date of the Baker Hughes and Halliburton special meetings, Baker Hughes and Halliburton stockholders will not know at the time of the special meetings the exact market value of the Halliburton common stock to be issued to Baker Hughes stockholders upon completion of the merger.

The ability of Baker Hughes and Halliburton to complete the merger is subject to various closing conditions, including the approval of Baker Hughes and Halliburton stockholders and the receipt of consents and approvals from governmental authorities, which may impose conditions that could adversely affect Baker Hughes or Halliburton or cause the merger to be abandoned.

To complete the merger, Halliburton stockholders must approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement, and Baker Hughes stockholders must adopt the merger agreement. In addition, each of Halliburton and Baker Hughes must also make certain filings with and obtain certain consents and approvals from various governmental and regulatory authorities.

Halliburton and Baker Hughes have not yet obtained the regulatory consents and approvals required to complete the merger. Governmental or regulatory agencies could seek to block or challenge the merger or could impose restrictions they deem necessary or desirable in the public interest as a condition to approving the merger. Baker Hughes and Halliburton will be unable to complete the merger until the waiting periods under the HSR Act have expired or been terminated and consents and approvals are received from the European Commission and various other governmental authorities (jointly, the “Regulatory Clearances”). Regulatory authorities may impose certain requirements or obligations as conditions for their approval. The merger agreement may require Baker Hughes and/or Halliburton to accept conditions from these regulators that could adversely impact the combined company. If the Regulatory Clearances are not received, or they are not received on terms that satisfy the conditions set forth in the merger agreement, then neither Halliburton nor Baker Hughes will be obligated to complete the merger.

Additionally, even after the statutory waiting period under the antitrust 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. Baker Hughes or Halliburton may not prevail and may incur significant costs in defending or settling any action under the antitrust laws.

The special meetings at which the Halliburton stockholders and the Baker Hughes stockholders will vote on the transactions contemplated by the merger agreement may take place before all such approvals have been obtained and, in cases where they have not been obtained, before the terms of any conditions to obtain such approvals that may be imposed are known. As a result, if stockholder approval of the transactions contemplated by the merger agreement is obtained at such meetings, Halliburton and Baker Hughes may make decisions after the special meetings to waive a condition or approve certain actions required to obtain necessary approvals without seeking further stockholder approval. Such actions could have an adverse effect on the combined company.

In addition, the merger agreement contains other customary closing conditions, which are described in “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 133 and which may not be satisfied or waived.

If Halliburton and Baker Hughes are unable to complete the merger, Halliburton and Baker Hughes would be subject to a number of risks, including the following:

 

•

Halliburton and Baker Hughes would not realize the anticipated benefits of the merger, including, among other things, increased operating efficiencies;

 

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the attention of management of Halliburton and Baker Hughes may have been diverted to the merger rather than to each company’s own operations and the pursuit of other opportunities that could have been beneficial to that company;

 

•

the potential loss of key personnel during the pendency of the merger as employees may experience uncertainty about their future roles with the combined company;

 

•

Halliburton and Baker Hughes will have been subject to certain restrictions on the conduct of their respective businesses, which may prevent them from making certain acquisitions or dispositions or pursuing certain business opportunities while the merger is pending; and

 

•

the trading price of Halliburton common stock and/or Baker Hughes common stock may decline to the extent that the current market prices reflect a market assumption that the merger will be completed.

Halliburton and Baker Hughes are each required to pay the other a termination fee, and Baker Hughes is required to reimburse Halliburton’s merger-related out-of-pocket expenses, if the merger agreement is terminated under certain specified circumstances, which are described in “The Merger Agreement—Termination of the Merger Agreement and Termination Fees” beginning on page 147.

We can provide no assurance that the various closing conditions will be satisfied and that the necessary Regulatory Clearances and other approvals will be obtained, or that any required conditions will not materially adversely affect the combined company following the merger. In addition, we can provide no assurance that these conditions will not result in the abandonment or delay of the merger. The occurrence of any of these events individually or in combination could have a material adverse effect on the companies’ results of operations and the trading price of Halliburton common stock or Baker Hughes common stock.

The merger agreement contains provisions that limit Baker Hughes’s or Halliburton’s ability to pursue alternatives to the merger, could discourage a potential competing acquirer of either Baker Hughes or Halliburton from making a favorable alternative transaction proposal and, in certain circumstances, could require Baker Hughes to pay a termination fee of $1.0 billion to Halliburton, or require Halliburton to pay a termination fee of $1.5 billion or, in certain cases related to failures to obtain required regulatory clearances, $3.5 billion to Baker Hughes.

If the merger is not completed, the ongoing businesses of Baker Hughes and Halliburton may be adversely affected. Under the merger agreement, Halliburton could be required, under certain circumstances, to pay Baker Hughes a termination fee of $1.5 billion or, in certain circumstances where the termination of the merger agreement is related to failures to obtain the Regulatory Clearances, $3.5 billion. Baker Hughes could be required, under certain circumstances, to pay Halliburton a termination fee of $1.0 billion or reimburse Halliburton for certain costs relating to the merger up to a maximum of $40 million. If such a termination fee is payable, the payment of this fee could have material and adverse consequences to the financial condition and operations of the company making such payment.

Under the merger agreement, Baker Hughes and Halliburton are restricted from entering into alternative transactions. Unless and until the merger agreement is terminated, subject to specified exceptions (which are discussed in more detail in “The Merger Agreement,” beginning on page 127), each party is restricted from soliciting, initiating, knowingly encouraging or facilitating, or negotiating, any inquiry, proposal or offer for an alternative proposal with any person. While either company’s board of directors is permitted to change its recommendation to stockholders prior to the special meeting under certain circumstances, namely if such company is in receipt of a “superior proposal” or an “intervening event” (as such terms are defined in the merger agreement) has occurred, before either company’s board of directors changes its recommendation to stockholders in such circumstances, such company must, if requested by the other company, negotiate with the other company regarding potential amendments to the merger agreement. Baker Hughes and Halliburton may each terminate the merger agreement and enter into an agreement with respect to a superior proposal only if specified conditions have been satisfied, including compliance with the provisions of the merger agreement restricting solicitation of alternative

 

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proposals and requiring payment of a termination fee in certain circumstances. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of Baker Hughes or Halliburton from considering or proposing that acquisition, even if such third party were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the merger, or might result in a potential competing acquirer proposing to pay a lower price than it would otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances. As a result of these restrictions, neither Baker Hughes nor Halliburton may be able to enter into an agreement with respect to a more favorable alternative transaction without incurring potentially significant liability to the other.

The pendency of the merger could adversely affect Baker Hughes and/or Halliburton.

In connection with the pending merger, some of the suppliers and customers of Baker Hughes and/or Halliburton may delay or defer sales and purchasing decisions, which could negatively impact revenues, earnings and cash flows regardless of whether the merger is completed. Baker Hughes and Halliburton have each agreed in the merger agreement to refrain from taking certain actions with respect to their business and financial affairs during the pendency of the merger, which restrictions could be in place for an extended period of time if completion of the merger is delayed and could adversely impact Baker Hughes’s and Halliburton’s financial condition, results of operations or cash flows.

Baker Hughes and Halliburton may be unable to attract and retain key employees during the pendency of the merger.

In connection with the pending merger, current and prospective employees of Baker Hughes and Halliburton may experience uncertainty about their future roles with the combined company following the merger, which may materially adversely affect the ability of Baker Hughes or Halliburton to attract and retain key personnel during the pendency of the merger. Key employees may depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company following the merger. Accordingly, no assurance can be given that Baker Hughes or Halliburton will be able to attract and retain key employees to the same extent that it has been able to in the past.

Pending litigation against Baker Hughes and Halliburton could result in an injunction preventing the consummation of the merger or may adversely affect Halliburton’s business, financial condition or results of operations following the merger.

Following the announcement of the merger, various lawsuits were filed in the Court of Chancery of the State of Delaware and the U.S. District Court for the Southern District of Texas against Baker Hughes, the members of the Baker Hughes Board, Halliburton and Merger Sub, alleging breaches of various fiduciary duties by the members of the Baker Hughes Board during the merger negotiations and by entering into the merger agreement and approving the merger and alleging that Baker Hughes, Halliburton and Merger Sub aided and abetted such alleged breaches of fiduciary duties. Among other remedies, the plaintiffs seek to enjoin the merger and rescind the merger agreement, in addition to certain unspecified damages and reimbursement of costs. While Baker Hughes and Halliburton believe these suits are without merit and intend to vigorously defend against such claims, the outcome of any such litigation is inherently uncertain. The defense, outcome or settlement of any lawsuit or claim that remains unresolved at the time the merger closes may adversely affect the combined company’s business, financial condition or results of operation. See “The Proposed Merger—Litigation Relating to the Merger” beginning on page 116 for more detail.

Each of Halliburton and Baker Hughes will incur significant transaction, merger-related and restructuring costs in connection with the merger.

Halliburton and Baker Hughes expect to incur costs associated with combining the operations of the two companies, as well as transaction fees and other costs related to the merger. The combined company also will

 

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incur restructuring and integration costs in connection with the merger. Halliburton is in the early stages of assessing the magnitude of these costs and additional unanticipated costs may be incurred in the integration of the businesses of Halliburton and Baker Hughes. The costs related to restructuring will be expensed as a cost of the ongoing results of operations of either Halliburton or Baker Hughes or the combined company. Although Halliburton and Baker Hughes expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction, merger-related and restructuring costs over time, any net benefit may not be achieved in the near term or at all. Many of these costs will be borne by Halliburton and/or Baker Hughes even if the merger is not completed.

Current Halliburton and Baker Hughes stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management of the combined company.

Upon completion of the merger, Halliburton expects to issue up to approximately 490 million shares of Halliburton common stock to Baker Hughes stockholders in connection with the transactions contemplated by the merger agreement. As a result, former Baker Hughes stockholders are expected to hold approximately 37% of the shares of Halliburton’s common stock outstanding immediately following the completion of the merger.

Halliburton stockholders and Baker Hughes stockholders currently have the right to vote for their respective boards of directors and on other matters affecting the applicable company. When the merger occurs, each Baker Hughes stockholder that receives shares of Halliburton common stock will become a stockholder of Halliburton with a percentage ownership of the combined company that is significantly smaller than the stockholder’s percentage ownership in Baker Hughes. Correspondingly, each Halliburton stockholder will remain a stockholder of Halliburton with a percentage ownership of the combined company that is significantly smaller than the stockholder’s percentage ownership of Halliburton prior to the merger. As a result of these reduced ownership percentages, Halliburton stockholders will have less influence on the management and policies of the combined company than they now have with respect to Halliburton, and former Baker Hughes stockholders will have less influence on the management and policies of the combined company than they now have with respect to Baker Hughes.

The shares of Halliburton common stock to be received by Baker Hughes stockholders as a result of the merger will have different rights from shares of Baker Hughes common stock.

Following completion of the merger, Baker Hughes stockholders will no longer be stockholders of Baker Hughes but will instead be stockholders of Halliburton. There are important differences between the rights of Baker Hughes stockholders and the rights of Halliburton stockholders. See “Comparison of Stockholders’ Rights” beginning on page 162 for a discussion of the different rights associated with Halliburton common stock and Baker Hughes common stock.

Members of the management and board of directors of Baker Hughes have interests in the merger that are different from, or in addition to, those of other stockholders.

In considering whether to approve the transactions contemplated by the merger agreement, Baker Hughes stockholders should recognize that members of management and the Baker Hughes Board have interests in the merger that differ from, or are in addition to, their interests as stockholders of Baker Hughes. These interests are described in “Additional Interests of Baker Hughes’s Directors and Executive Officers in the Merger” beginning on page 117.

 

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The unaudited pro forma combined financial information and prospective financial information included in this joint proxy statement/prospectus are presented for illustrative purposes only and do not represent the actual financial position or results of operations of the combined company following the merger. Specifically, the unaudited pro forma combined financial information does not reflect the effect of any divestitures that may be required in connection with the merger.

The unaudited pro forma combined financial information and prospective financial information contained in this joint proxy statement/prospectus are presented for illustrative purposes only, contain a variety of adjustments, assumptions and preliminary estimates and do not represent the actual financial position or results of operations of Halliburton and Baker Hughes prior to the merger or that of the combined company following the merger for several reasons. Specifically, the unaudited pro forma combined financial information does not reflect the effect of any divestitures that may be required in connection with the merger. See the sections entitled “Selected Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 29, “Comparative Historical and Unaudited Pro Forma Combined Per Share Information” beginning on page 30 and “The Proposed Merger—Forward-Looking Financial Information” beginning on page 105. The actual financial positions and results of operations of Halliburton and Baker Hughes prior to the merger and that of the combined company following the merger may not be consistent with, or evident from, the unaudited pro forma combined financial information and prospective financial information included in this joint proxy statement/prospectus. In addition, the assumptions used in preparing the unaudited pro forma combined financial information and prospective financial information included in this joint proxy statement/prospectus may not prove to be accurate and may be affected by other factors. Any significant changes in the share price of Halliburton may cause a significant change in the purchase price and the pro forma financial information.

Risks Relating to Halliburton Following the Merger

The combined company could incur substantial expenses related to the integration of Baker Hughes and Halliburton.

Baker Hughes and Halliburton expect that the combined company will incur substantial expenses in connection with integrating their respective businesses, policies, procedures, operations, technologies and systems. There are a large number of systems that must be integrated, including information management, purchasing, accounting and finance, sales, billing, payroll and benefits, fixed asset and lease administration systems and regulatory compliance. There are a number of factors beyond the control of either party that could affect the total amount or the timing of all of the expected integration expenses. Moreover, many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. These expenses could, particularly in the near term, reduce the savings that Halliburton expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of the businesses following the completion of the merger, and accordingly, any net benefits may not be achieved in the near term or at all. These integration expenses may result in the combined company taking significant charges against earnings following the completion of the merger.

Following the merger, the combined company may encounter difficulties in integrating Baker Hughes’s and Halliburton’s businesses and realizing the anticipated benefits of the merger.

The merger involves the combination of two companies which currently operate as independent public companies. The combined company will be required to devote management attention and resources to integrating its business practices and operations, and prior to the merger, management attention and resources will be required to plan for such integration. Potential difficulties the combined company may encounter in the integration process include the following:

 

•

the inability to successfully integrate the respective businesses of the two companies in a manner that permits the combined company to achieve the cost savings and operating synergies anticipated to result from the merger, which could result in the anticipated benefits of the merger not being realized partly or wholly in the time frame currently anticipated or at all;

 

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•

lost sales and customers as a result of certain customers of either or both of the two companies deciding not to do business with the combined company, or deciding to decrease their amount of business in order to reduce their reliance on a single company;

 

•

integrating personnel from the two companies while maintaining focus on providing consistent, high quality products and services;

 

•

potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger; and

 

•

performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the merger and integrating the companies’ operations.

Business issues currently faced by one company may be imputed to the operations of the other company.

To the extent that either Halliburton or Baker Hughes currently has or is perceived by customers to have operational challenges, those challenges may raise concerns by existing customers of the other company following the merger which may limit or impede Halliburton’s future ability to obtain additional work from those customers.

Failure to retain key employees and skilled workers could adversely affect Halliburton following the merger.

Halliburton’s performance following the merger could be adversely affected if the combined company is unable to retain certain key employees and skilled workers of Baker Hughes. The loss of the services of these key employees and skilled workers could adversely affect Halliburton’s future operating results because of their experience and knowledge of Baker Hughes’s business. In addition, current and prospective employees of Halliburton and Baker Hughes may experience uncertainty about their future roles with the combined company until after the merger is completed. This may adversely affect the ability of Halliburton and Baker Hughes to attract and retain key personnel, which could adversely affect Halliburton’s performance following the merger.

The required regulatory approvals, if obtained, may contain materially burdensome conditions, including significant divestitures, that could have an adverse effect on the combined company following the merger.

Completion of the merger is conditioned upon the receipt of certain Regulatory Clearances, including the expiration or termination of the applicable waiting period under the HSR Act, the issuance by the European Commission of a decision under the EC Merger Regulation declaring the merger compatible with the common market and the approval of the merger by the antitrust regulators in other specified jurisdictions. Even if these approvals are obtained, the governmental authorities from which these approvals are required may impose conditions on the completion of the merger, including requiring significant divestitures, that could have an adverse effect on the combined company following the merger.

Under the terms of the merger agreement, Halliburton has agreed to take any action, including with respect to any request that assets, businesses or product lines be divested or held separate or subject to conduct remedies, limitations or other actions, as may be necessary to resolve such objections, if any, that the FTC, the DOJ, the European Commission, state antitrust enforcement authorities or competition authorities of any other nation or other jurisdiction, may assert in connection with obtaining antitrust clearance for the merger so as to enable the closing of the merger to occur as soon as reasonably possible (and in any event no later than the outside date). Halliburton, however, is not required (although it could so choose) to divest or hold separate, or agree to any conduct remedy or similar antitrust action regarding, any assets, businesses or product lines if such assets, businesses or product lines accounted for, in the aggregate, more than the detriment limit. If Halliburton agrees to undertake divestitures or comply with operating restrictions in order to obtain any approvals required to complete the merger (including agreeing to measures with respect to assets, business or product lines representing more than $7.5 billion of 2013 revenues), Halliburton may be less able to realize anticipated benefits of the merger, and the business and results of operations of the combined company after the merger may be adversely affected.

 

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The combined company will record goodwill that could become impaired and adversely affect the combined company’s operating results.

The merger will be accounted for as an acquisition by Halliburton in accordance with accounting principles generally accepted in the United States. Under the acquisition method of accounting, the assets and liabilities of Baker Hughes will be recorded, as of the date of completion of the merger, at their respective fair values and added to those of Halliburton. The reported financial condition and results of operations of Halliburton issued after completion of the merger will reflect Baker Hughes balances and results after completion of the merger, but will not be restated retroactively to reflect the historical financial position or results of operations of Baker Hughes for periods prior to the merger. Under the acquisition method of accounting, the total purchase price will be allocated to Baker Hughes’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the date of completion of the merger. The excess of the purchase price over those fair values will be recorded as goodwill. Halliburton and Baker Hughes expect that the merger will result in the creation of goodwill based upon the application of the acquisition method of accounting. To the extent the value of goodwill or intangibles becomes impaired, the combined company may be required to incur material charges relating to such impairment. Such a potential impairment charge could have a material impact on the combined company’s operating results. See “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 152.

The combined enterprise’s indebtedness following the merger will be greater than Halliburton’s existing indebtedness. Therefore, it may be more difficult for the combined enterprise to pay or refinance its debts or take other actions, and the combined enterprise may need to divert its cash flow from operations to debt service payments.

In connection with the merger, Halliburton will incur additional debt to pay the merger consideration and transaction expenses and the indebtedness of the combined enterprise will include Baker Hughes’s outstanding debt. See “Description of Halliburton’s Debt Financing” beginning on page 173 for a discussion of Halliburton’s merger-related financing. Halliburton’s total indebtedness as of September 30, 2014 was approximately $16.1 billion. Halliburton’s pro forma total consolidated indebtedness as of September 30, 2014, after giving effect to the merger, would have been approximately $37.0 billion (including approximately $11.0 billion of current liabilities and approximately $26.0 billion of long-term debt and other long-term obligations). The combined enterprise’s debt service obligations with respect to this increased indebtedness could have an adverse impact on its earnings and cash flows, which after the merger would include the earnings and cash flows of Baker Hughes, for as long as the indebtedness is outstanding.

The combined enterprise’s increased indebtedness could also have important consequences to holders of Halliburton common stock. For example, it could:

 

•

make it more difficult for the combined enterprise to pay or refinance its debts as they become due during adverse economic and industry conditions because any decrease in revenues could cause the combined enterprise to not have sufficient cash flows from operations to make its scheduled debt payments;

 

•

limit the combined enterprise’s flexibility to pursue other strategic opportunities or react to changes in its business and the industry in which it operates and, consequently, place the combined enterprise at a competitive disadvantage to its competitors with less debt;

 

•

require a substantial portion of the combined enterprise’s cash flows from operations to be used for debt service payments, thereby reducing the availability of its cash flow to fund working capital, capital expenditures, acquisitions, dividend payments and other general corporate purposes;

 

•

result in a downgrade in the rating of Halliburton’s indebtedness, which could limit Halliburton’s ability to borrow additional funds and increase the interest rates applicable to Halliburton’s indebtedness (after the announcement of the merger, Standard & Poor’s Ratings Services placed all of Halliburton’s ratings on negative watch, and all of Baker Hughes’s ratings on negative watch);

 

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•

result in higher interest expense in the event of increases in interest rates since some of Halliburton’s borrowings are, and will continue to be, at variable rates of interest; or

 

•

require the combined enterprise to repatriate foreign earnings and incur associated tax expenses to meet liquidity demands.

Based upon current levels of operations, Halliburton expects the combined enterprise to be able to generate sufficient cash on a consolidated basis to make all of the principal and interest payments when such payments are due under its existing credit facilities, indentures and other instruments governing their outstanding indebtedness, and the indebtedness of Baker Hughes that may remain outstanding after the merger, but there can be no assurance that the combined enterprise will be able to repay or refinance such borrowings and obligations.

Risks Relating to Halliburton Common Stock Following the Merger

The market value of Halliburton common stock could decline if large amounts of its common stock are sold following the merger.

Following the merger, stockholders of Halliburton and former stockholders of Baker Hughes will own interests in a combined company operating an expanded business with more assets and a different mix of liabilities. Current stockholders of Halliburton and Baker Hughes may not wish to continue to invest in the combined company, or may wish to reduce their investment in the combined company, in order to comply with institutional investing guidelines, to increase diversification or to track any rebalancing of stock indices in which Halliburton or Baker Hughes common stock is or was included. If, following the merger, large amounts of Halliburton common stock are sold, the price of its common stock could decline.

The merger may not be accretive, and may be dilutive, to Halliburton’s earnings per share in the near term, which may negatively affect the market price of Halliburton common stock.

Halliburton anticipates that the merger may not be accretive, and may be dilutive, to earnings per share until the end of the second calendar year after closing. This expectation is based on preliminary estimates that may materially change. In addition, future events and conditions could decrease or delay any accretion, result in dilution or cause greater dilution than is currently expected, including:

 

•

adverse changes in energy market conditions;

 

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commodity prices for oil, natural gas and natural gas liquids;

 

•

production levels;

 

•

operating results;

 

•

competitive conditions;

 

•

laws and regulations affecting the energy business;

 

•

capital expenditure obligations;

 

•

higher than expected integration costs;

 

•

lower than expected synergies; and

 

•

general economic conditions.

Any dilution of, or decrease or delay of any accretion to, Halliburton’s earnings per share could cause the price of Halliburton’s common stock to decline.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The statements in this joint proxy statement/prospectus and the documents incorporated by reference herein that are not historical statements, including statements regarding the expected timetable for completing the merger, benefits and synergies of the merger, future opportunities for the combined company and products, future financial performance and any other statements regarding Halliburton’s and Baker Hughes’s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the companies’ control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: failure to obtain the required votes of Halliburton’s or Baker Hughes’s stockholders; the timing to consummate the merger; the risk that conditions to closing of the merger may not be satisfied or the closing of the merger may otherwise not occur; the risk that a regulatory approval that may be required for the merger is not obtained or is obtained subject to conditions that are not anticipated; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of Halliburton and Baker Hughes and the ultimate outcome of Halliburton’s operating efficiencies applied to Baker Hughes’s products and services; the effects of the business combination of Halliburton and Baker Hughes, including the combined company’s future financial condition, results of operations, strategy and plans; expected synergies and other benefits from the merger and the ability of Halliburton to realize such synergies and other benefits; expectations regarding regulatory approval of the transaction; the possibility that Halliburton and Baker Hughes may not be able to maintain relationships with their employees, suppliers or customers as a result of the uncertainty surrounding the merger; direct or indirect effects on the combined company’s business, financial condition or liquidity resulting from a change in its credit rating or the credit ratings of its counterparties or competitors; results of litigation, settlements and investigations; final court approval of, and the satisfaction of the conditions in, Halliburton’s September 2014 settlement relating to the Macondo well incident in the Gulf of Mexico; appeals of the multi-district litigation District Court’s September 2014 ruling regarding Phase 1 of the trial, and future rulings of the District Court; results of litigation, settlements, and investigations not covered by the settlement or the District Court’s rulings; actions by third parties, including governmental agencies, relating to the Macondo well incident; BP’s April 2012 settlement relating to the Macondo well incident, indemnification and insurance matters; with respect to repurchases of Halliburton common stock, the continuation or suspension of the repurchase program, the amount, the timing and the trading prices of Halliburton common stock, and the availability and alternative uses of cash; actions by third parties, including governmental agencies; changes in the demand for or price of oil and/or natural gas can be significantly impacted by weakness in the worldwide economy and by the Organization of Petroleum Exporting Countries (“OPEC”) policy and the adherence by OPEC nations to their OPEC production quotas; consequences of audits and investigations by domestic and foreign government agencies and legislative bodies and related publicity and potential adverse proceedings by such agencies; protection of intellectual property rights and against cyber attacks; compliance with environmental laws; changes in government regulations and regulatory requirements, particularly those related to offshore oil and natural gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services and climate-related initiatives; compliance with laws related to income taxes and assumptions regarding the generation of future taxable income; risks of international operations, including risks relating to unsettled political conditions, war, the effects of terrorism, epidemic outbreaks, foreign exchange rates and controls, international trade and regulatory controls, and doing business with national oil companies; weather-related issues, including the effects of hurricanes and tropical storms; changes in capital spending by customers; delays or failures by customers to make payments owed to the companies; execution of long-term, fixed-price contracts; impairment of oil and natural gas properties; structural changes in the oil and natural gas industry; maintaining a highly skilled workforce; availability and cost of raw materials; and integration of acquired businesses and operations of joint ventures.

Any forward-looking statements should be considered in light of such important factors. Halliburton and Baker Hughes undertake no obligation to revise or update publicly any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on any forward-looking statement, which speaks only as of the date on which such statement is made or in the case of documents incorporated by reference, as of the date of the document incorporated by reference.

 

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THE COMPANIES

Halliburton Company

Halliburton’s predecessor was established in 1919 and incorporated under the laws of the State of Delaware in 1924. Halliburton is a leading provider of services and products to the energy industry related to the exploration, development, and production of oil and natural gas. Halliburton serves major, national, and independent oil and natural gas companies throughout the world and operates under two divisions, which form the basis for the two operating segments Halliburton reports, the Completion and Production segment and the Drilling and Evaluation segment:

 

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the Completion and Production segment delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift, and completion services. The segment consists of Production Enhancement, Cementing, Completion Tools, Boots & Coots, Multi-Chem and Artificial Lift.

 

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the Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation, and precise wellbore placement solutions that enable customers to model, measure, drill, and optimize their well construction activities. The segment consists of Baroid, Sperry Drilling, Wireline and Perforating, Drill Bits and Services, Landmark Software and Services, Testing and Subsea, and Consulting and Project Management.

The business operations of Halliburton’s segments are organized around four primary geographic regions: North America, Latin America, Europe/Africa/CIS, and Middle East/Asia. Halliburton has significant manufacturing operations in various locations, including the United States, Canada, Malaysia, China, Singapore, and the United Kingdom.

With over 80,000 employees, Halliburton operates in approximately 80 countries around the world, with corporate headquarters in Houston, Texas and Dubai, United Arab Emirates. Halliburton common stock is listed on the NYSE and Halliburton’s trading symbol is “HAL.”

Red Tiger LLC

Red Tiger LLC, a Delaware limited liability company and direct, wholly owned subsidiary of Halliburton, was formed solely for the purpose of consummating the merger. Red Tiger has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the merger and the transactions contemplated by the merger agreement.

Baker Hughes Incorporated

Baker Hughes is a leading supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry. Baker Hughes also provides industrial products and services to the downstream chemicals, and process and pipeline industries. Baker Hughes was formed as a corporation in April 1987 in connection with the combination of Baker International Corporation and Hughes Tool Company. Baker Hughes conducts its operations through subsidiaries, affiliates, ventures and alliances. Baker Hughes operates in more than 80 countries around the world and its corporate headquarters is in Houston, Texas. Baker Hughes has approximately 61,100 employees, of which approximately 58% work outside the United States.

Baker Hughes’s global oilfield operations are organized into a number of geomarket organizations, which are combined into and report to four region presidents, who in turn report to its chief executive officer. These regions form the basis of the four operating segments detailed below:

 

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North America—headquartered in Houston, Texas

 

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Latin America—headquartered in Houston, Texas

 

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Europe/Africa/Russian Caspian—headquartered in London, England

 

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Middle East/Asia Pacific—headquartered in Dubai, United Arab Emirates

Through the geographic organization, Baker Hughes has placed its management close to customers, facilitating stronger customer relationships and allowing Baker Hughes to react quickly to local market conditions and customer needs. The geographic organization supports its oilfield operations and is responsible for sales, field operations and well site execution. In addition to the above, Baker Hughes has an Industrial Services segment, headquartered in Houston, Texas, which includes the downstream chemicals business and the process and pipeline services business.

Certain support operations are organized at the enterprise level and include the supply chain and product line technology organizations. The supply chain organization is responsible for the cost-effective procurement and manufacturing of Baker Hughes’s products as well as product quality and reliability. The product line technology organization is responsible for product development, technology and marketing of innovative and reliable solutions for customers to advance their reservoir performance. The product line technology organization also facilitates cross-product line technology development, sales processes and integrated operations capabilities. Baker Hughes common stock is listed on the NYSE and Baker Hughes’s trading symbol is “BHI.”

 

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INFORMATION ABOUT THE HALLIBURTON SPECIAL MEETING AND VOTE

The Halliburton Board is using this joint proxy statement/prospectus to solicit proxies from the holders of Halliburton common stock for use at the special meeting of Halliburton stockholders. Halliburton is first mailing this joint proxy statement/prospectus and accompanying proxy card to Halliburton stockholders on or about [                     ], 2015.

Date, Time and Place of Halliburton Special Meeting

The Halliburton special meeting will take place on March 27, 2015, at 9:00 a.m., local time, at 3000 N. Sam Houston Parkway East, Life Center-Auditorium, Houston, Texas 77032.

Matters to be Considered

The following matters will be considered at the meeting:

1. A proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement.

2. A proposal to adjourn Halliburton’s special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares.

3. Any other business properly brought before the special meeting.

Halliburton Record Date; Quorum; and Voting Rights

The Halliburton Board has fixed the close of business on February 17, 2015 as the record date for determination of stockholders entitled to notice of and to vote at the Halliburton special meeting. Only holders of record at the close of business on the record date are entitled to vote at the Halliburton special meeting.

A quorum is the number of shares that must be represented at a meeting to lawfully conduct business. The presence, in person or by proxy, of holders of a majority of the Halliburton common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business. As of February 12, 2015, a total of 849,655,046 shares were outstanding and eligible to vote at the Halliburton special meeting. As of February 12, 2015, the presence of 424,827,524 shares would constitute a quorum. Abstentions and broker non-votes are included in the calculation of the number of shares considered to be present at the Halliburton special meeting for purposes of determining a quorum.

Each stockholder is entitled to one vote at the Halliburton special meeting for each share of Halliburton common stock held by that stockholder at the close of business on the record date.

A complete list of stockholders entitled to vote at the Halliburton special meeting will be available for examination by any Halliburton stockholder for ten days before the special meeting during regular business hours at Halliburton’s headquarters, 3000 N. Sam Houston Parkway East, Houston, Texas 77032, and at the time and place of the Halliburton special meeting.

Required Vote

 

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Approval of the proposal respecting the issuance of shares of Halliburton common stock as contemplated by the merger agreement requires the affirmative vote of a majority of votes cast at the Halliburton special meeting by holders of Halliburton common stock.

 

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Approval of the proposal respecting the adjournment of the Halliburton stockholders meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares requires the affirmative vote of the holders of a majority of the shares of Halliburton common stock represented at the Halliburton special meeting and entitled to vote on such proposal.

Broker Non-Votes

Under the listing requirements of the NYSE, brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters that the NYSE determines to be “non-routine.” Accordingly, a broker non-vote occurs when the broker is not permitted to vote on an item without instruction from the beneficial owner of shares of common stock and the beneficial owner gives no instruction as to voting of the shares.

Under NYSE rules, your broker or bank does not have discretionary authority to vote your shares on the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement or the proposal to adjourn the Halliburton special meeting, if necessary or advisable. Therefore, if you are a Halliburton stockholder and you do not instruct your broker on how to vote your shares:

 

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your broker may not vote your shares on the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement, which broker non-votes will have no effect on the vote on this proposal; and

 

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your broker may not vote your shares on the proposal to adjourn Halliburton’s special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares, which broker non-votes will have no effect on the outcome of the proposal.

Abstentions; Not Voting

 

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For the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement, if you abstain on the proposal, your shares will be counted as a vote cast, and, therefore, will have the same effect as a vote AGAINST such proposal. A failure to submit a proxy is not counted as a vote cast, and as such, will not otherwise have an effect on the outcome of the vote for the proposal, but it will make it more difficult to meet the requirement under Halliburton’s by-laws that the holders of a majority of the Halliburton common stock issued and outstanding and entitled to vote at the special meeting be present in person or by proxy to constitute a quorum at the special meeting.

 

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For the proposal to adjourn the Halliburton special meeting, if necessary or advisable, an abstention will have the same effect as a vote cast AGAINST such proposal. A failure to submit a proxy or vote in person at the special meeting will not have an effect on the outcome of the vote on the proposal.

Appraisal Rights

Under Delaware law, Halliburton stockholders are not entitled to appraisal rights in connection with the issuance of shares of Halliburton common stock as contemplated by the merger agreement. It is anticipated that Halliburton shares will continue to be traded on the NYSE during the pendency of and following the effectiveness of the merger, and Halliburton’s corporate status will not change because the merger is being consummated between one of its subsidiaries and Baker Hughes.

 

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Shares Beneficially Owned by Halliburton Directors and Officers

Halliburton’s directors and executive officers beneficially owned 2,783,731 shares of Halliburton common stock on February 12, 2015. These shares represent in total 0.33% of the total voting power of Halliburton’s voting securities outstanding and entitled to vote as of February 12, 2015. Halliburton currently expects that Halliburton’s directors and executive officers will vote their shares in favor of all the proposals to be voted on at the special meeting, although none of them has entered into any agreements obligating them to do so.

How Shares are Voted; Proxies

Stockholders of record may vote in person by ballot at the special meeting or by submitting their proxies:

 

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by internet until 11:59 p.m. Houston, Texas time on March 26, 2015;

 

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by telephone until 11:59 p.m. Houston, Texas time on March 26, 2015; or

 

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by completing, signing and returning your proxy or voting instruction card before March 27, 2015.

The internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded.

Stockholders of Halliburton who hold their shares in “street name” by a broker, nominee, fiduciary or other custodian should refer to the proxy card or other information forwarded by their broker, nominee, fiduciary or other custodian for instructions on how to vote their shares.

Halliburton recommends you submit your proxy even if you plan to attend the special meeting. If you properly give your proxy and submit it to Halliburton in time to vote, one of the individuals named as your proxy will vote your shares as you have directed. If you attend the special meeting, you may vote by ballot, thereby cancelling any proxy previously submitted. If you hold your shares in “street name,” you will have to obtain a legal proxy in your name from the broker, nominee, fiduciary or other custodian who holds your shares in order to vote in person at the special meeting. You may vote for or against the proposals or abstain from voting.

If you are a stockholder of record and submit your proxy but do not make specific choices, your proxy will follow the Halliburton Board’s recommendations and your shares will be voted:

1. FOR the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement.

2. FOR the proposal to adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the issuance of shares.

Revocation of Proxies

You have the right to revoke your proxy prior to the time your shares are voted at the special meeting. If you are a stockholder of record, your proxy can be revoked in several ways:

 

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by submitting a new proxy by telephone or the Internet prior to 11:59 p.m. Houston, Texas time on March 26, 2015;

 

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by delivering a written revocation to Halliburton’s Vice President and Corporate Secretary at Halliburton Company, 3000 N. Sam Houston Parkway East, Administration Building, Houston, Texas 77032 prior to the Halliburton special meeting;

 

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by submitting another valid proxy bearing a later date that is received prior to the Halliburton special meeting; or

 

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by attending the Halliburton special meeting and voting your shares in person.

However, if your shares are held in “street name” through a broker, nominee, fiduciary or other custodian, you must check with your broker, nominee, fiduciary or other custodian to determine how to revoke your proxy.

Solicitation of Proxies

Halliburton will pay the costs of soliciting proxies from Halliburton stockholders. In addition to this mailing, proxies may be solicited by directors, officers or employees of Halliburton in person, by telephone or electronic transmission. None of the directors, officers or employees will be directly compensated for such services. Halliburton has retained Innisfree and MacKenzie to assist in the distribution and solicitation of proxies. Halliburton will pay each of Innisfree and MacKenzie fees of approximately $75,000, plus reasonable expenses, for these services.

The extent to which these proxy soliciting efforts will be necessary depends entirely upon how promptly proxies are submitted. You should submit your proxy without delay by mail, by telephone or via the Internet. Halliburton also reimburses brokers, nominees, fiduciaries or other custodians for their expenses in sending these materials to you and getting your voting instructions.

Other Business; Adjournments

Halliburton is not currently aware of any other business to be acted upon at the Halliburton special meeting. If, however, other matters are properly brought before the special meeting, your proxies include discretionary authority on the part of the individuals appointed to vote your shares to act on those matters according to their best judgment.

Any adjournment may be made from time to time by the affirmative vote of the holders of a majority of the shares represented at the Halliburton special meeting in person or by proxy and entitled to vote thereat and, whether or not a quorum is present, without further notice other than by announcement at the meeting.

If the special meeting is adjourned to a different place, date or time, Halliburton need not give notice of the new place, date or time if the new place, date or time is announced at the meeting before adjournment, unless a new record date is set for the meeting. The Halliburton Board may fix a new record date if the meeting is adjourned. Proxies submitted by Halliburton stockholders for use at the special meeting will be used at any adjournment or postponement of the meeting. Unless the context otherwise requires, references to the Halliburton special meeting in this joint proxy statement/prospectus are to such special meeting as adjourned or postponed.

Halliburton Stockholder Account Maintenance

Halliburton’s transfer agent is Computershare Shareowner Services LLC. All communications concerning accounts of Halliburton stockholders of record, including address changes, name changes, inquiries as to requirements to transfer shares of common stock and similar issues can be handled by calling Computershare Shareowner Services LLC, toll-free at (800) 279-1227.

 

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INFORMATION ABOUT THE BAKER HUGHES SPECIAL MEETING AND VOTE

Baker Hughes is providing this joint proxy statement/prospectus to its stockholders in connection with the solicitation of proxies to be voted at the special meeting of Baker Hughes stockholders (or any adjournment or postponement of the Baker Hughes special meeting) that Baker Hughes has called to consider and vote on (i) a proposal to adopt the merger agreement and thereby approve the merger, (ii) a proposal to adjourn the Baker Hughes special meeting, if necessary or advisable, to permit further solicitations of proxies in the event there are not sufficient votes at the time of the Baker Hughes special meeting to adopt the merger agreement and (iii) a proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger. This joint proxy statement/prospectus is first being mailed to Baker Hughes stockholders on or about [                    ], 2015.

Date, Time and Place of Baker Hughes Special Meeting

The Baker Hughes special meeting will be held at 2727 Allen Parkway, Wortham Meeting Room #2, Houston, Texas 77019 on March 27, 2015 at 9:00 a.m., local time.

Matters to be Considered

The following matters will be considered at the special meeting:

1. A proposal to adopt the merger agreement and thereby approve the merger.

2. A proposal to adjourn the Baker Hughes special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the Baker Hughes special meeting to adopt the merger agreement.

3. A proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger.

4. Any other business properly brought before the special meeting by or at the direction of the Board.

Baker Hughes Record Date; Quorum; and Voting Rights

The record date for the Baker Hughes special meeting is February 17, 2015. Only Baker Hughes stockholders of record at the close of business on February 17, 2015 will be entitled to receive notice of and to vote at the special meeting or any adjournment thereof. Shares of Baker Hughes common stock held by Baker Hughes as treasury shares and by Baker Hughes’s subsidiaries will not be entitled to vote.

The presence at the special meeting, in person or by proxy, of the holders of a majority of the shares of Baker Hughes common stock issued, outstanding and entitled to vote on the record date will constitute a quorum. Proxies received but marked as abstentions, if any, and broker non-votes, if any, will be included in the calculation of the number of shares considered to be present at the meeting for quorum purposes.

As of the close of business on February 12, 2015, there were 434,490,814 shares of Baker Hughes common stock outstanding and entitled to vote at the special meeting. Each holder of Baker Hughes common stock is entitled to one vote for each share of Baker Hughes common stock owned as of the close of business on the record date.

A complete list of Baker Hughes stockholders entitled to vote at the Baker Hughes special meeting will be available for inspection at the principal place of business of Baker Hughes during regular business hours for a period of no less than ten days before the special meeting and during and at the place of the Baker Hughes special meeting.

 

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Required Vote

To adopt the merger agreement, holders of a majority of the shares of Baker Hughes common stock outstanding and entitled to vote thereon must vote in favor of adoption of the merger agreement. Because approval is based on the affirmative vote of a majority of the outstanding shares of Baker Hughes common stock entitled to vote, a Baker Hughes stockholder’s failure to vote in person or by proxy at the special meeting, or an abstention from voting, or the failure of a Baker Hughes stockholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee, will have the same effect as a vote AGAINST adoption of the merger agreement.

To approve the adjournment of the special meeting, if necessary or advisable to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the special meeting, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote thereon is required, if a quorum is present. The chairman of the meeting may also (regardless of the outcome of the stockholder vote on adjournment) adjourn the meeting to another place, date and time. If a quorum is not present, a majority of the voting stock represented in person or by proxy, or the chairman of the meeting, may adjourn the meeting until a quorum is present. Shares held by stockholders who are not present at the special meeting in person or by proxy will have no effect on the outcome of any vote to adjourn the special meeting. Broker non-votes will have no effect on the outcome of any vote to adjourn the special meeting if a quorum is present but will have the same effect as a vote AGAINST if no quorum is present. Abstentions from voting will have the same effect as a vote AGAINST adjourning the special meeting.

To approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger, holders of a majority of the shares of Baker Hughes common stock present in person or represented by proxy at the meeting and entitled to vote thereon must vote in favor of the merger-related compensation proposal. Shares held by stockholders who are not present at the special meeting in person or by proxy will have no effect on the outcome of the merger-related compensation proposal. Broker non-votes will have no effect on the outcome of the merger-related compensation proposal. Abstentions from voting will have the same effect as a vote AGAINST the merger-related compensation proposal.

Broker Non-Votes

If your shares are held in an account at a broker or through another nominee, you must instruct the broker or other nominee on how to vote your shares. If you do not provide voting instructions to your broker or other nominee, your shares will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote. Broker non-votes, if any, will be counted as being present at the special meeting for purposes of determining a quorum, but will not be voted on those matters for which specific authorization is required. Under the current rules of the New York Stock Exchange, brokers do not have discretionary authority to vote on the proposal to adopt the merger agreement, the proposal to adjourn the special meeting or the merger-related compensation proposal. Therefore, if you do not provide voting instructions to your broker, your shares will not be voted on the proposal to adopt the merger agreement, the proposal to adjourn the special meeting or the merger-related compensation proposal. A broker non-vote will have the same effect as a vote AGAINST adoption of the merger agreement. A broker non-vote will have no effect on the outcome of any vote on the proposal to adjourn the special meeting if a quorum is present but will have the same effect as a vote AGAINST if no quorum is present. Broker non-votes will have no effect on the outcome of the merger-related compensation proposal.

Abstentions; Not Voting

For the proposal to adopt the merger agreement, an abstention or a failure to vote will have the same effect as a vote AGAINST such proposal.

 

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For the proposal to adjourn the Baker Hughes special meeting, if necessary or advisable, an abstention will have the same effect as a vote AGAINST adjourning the special meeting. A failure to submit a proxy or vote in person at the special meeting will not have an effect on the outcome of the vote on the proposal.

For the merger-related compensation proposal, an abstention will have the same effect as a vote AGAINST the proposal. A failure to submit a proxy or vote in person at the special meeting will not have an effect on the outcome of the vote on the proposal.

Appraisal Rights

Baker Hughes stockholders of record have appraisal rights under the DGCL in connection with the merger. Baker Hughes stockholders who do not vote in favor of the adoption of the merger agreement and who otherwise fully comply with and follow the applicable provisions of Section 262 of the DGCL will be entitled to exercise appraisal rights thereunder. Through an appraisal, the Court of Chancery of the State of Delaware will determine the “fair value” of Baker Hughes shares, which amount may be greater than, less than, or equal to the merger consideration. To exercise appraisal rights, Baker Hughes stockholders must (i) not vote in favor of the adoption of the merger agreement, (ii) deliver in the manner set forth below a written demand for appraisal of the stockholder’s shares to the Corporate Secretary of Baker Hughes before the vote on the adoption of the merger agreement at the special meeting at which the proposal to adopt the merger agreement will be submitted to Baker Hughes’s stockholders, (iii) continuously hold the shares of record from the date of making the demand through the effective time of the merger, and (iv) otherwise fully comply with and follow the requirements of Section 262. If, after the consummation of the merger, such holder of Baker Hughes common stock fails to perfect, withdraws or otherwise loses his, her or its appraisal rights, each such share will be treated as if it had been converted as of the consummation of the merger into a right to receive the merger consideration.

The relevant provisions of Section 262 of the DGCL are included as Annex B to this joint proxy statement/prospectus. You are encouraged to read these provisions carefully and in their entirety. Due to the complexity of the procedures for exercising your appraisal rights, Baker Hughes stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to comply with these provisions will result in the loss of appraisal rights. See the section entitled “Appraisal Rights of Baker Hughes Stockholders” beginning on page 169 of this joint proxy statement/prospectus for additional information and the full text of Section 262 of the DGCL reproduced in its entirety as Annex B to this joint proxy statement/prospectus.

Shares Beneficially Owned by Baker Hughes Directors and Officers

At the close of business on February 12, 2015, Baker Hughes’s directors and executive officers and their affiliates beneficially owned and had the right to vote 1,010,011 shares of Baker Hughes common stock at the special meeting, which represents approximately 0.23% of the shares of Baker Hughes common stock entitled to vote at the special meeting as of February 12, 2015.

It is expected that Baker Hughes’s directors and executive officers and their affiliates will vote their shares FOR the adoption of the merger agreement, FOR the adjournment of the Baker Hughes special meeting if necessary or advisable to solicit additional proxies in favor of such adoption and FOR the merger-related compensation proposal.

How Shares are Voted; Proxies

Stockholders of record may vote in person by ballot at the special meeting or by submitting their proxies:

 

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by telephone, by calling the toll-free number (800) 690-6903 and following the recorded instructions;

 

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by accessing the Internet website at www.proxyvote.com and following the instructions on the website; or

 

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by mail, by indicating your vote on each proxy card you receive, signing and dating each proxy card and returning each proxy card in the prepaid envelope that accompanied that proxy card.

The Internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded.

Stockholders of Baker Hughes who hold their shares in “street name” by a broker, nominee, fiduciary or other custodian should refer to the proxy card or other information forwarded by their broker, nominee, fiduciary or other custodian for instructions on how to vote their shares.

Baker Hughes recommends that you submit your proxy even if you plan to attend the special meeting. If you attend the special meeting, you may vote by ballot, thereby canceling any proxy previously submitted. If you properly give your proxy and submit it to Baker Hughes in time to vote, one of the individuals named as your proxy will vote your shares as you have directed. If you hold your shares in “street name,” you will have to obtain a legal proxy in your name from the broker, nominee, fiduciary or other custodian who holds your shares in order to vote in person at the special meeting. You may vote for or against the proposals or abstain from voting.

If you are a stockholder of record and submit your proxy but do not make specific choices with respect to the proposals, your proxy will follow the Baker Hughes Board’s recommendations and your shares will be voted FOR the proposal to adopt the merger agreement, FOR the proposal to adjourn the special meeting if necessary or advisable to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to adopt the merger agreement and FOR the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to Baker Hughes’s named executive officers in connection with the merger. Under such circumstances, your proxy will constitute a waiver of your right of appraisal under Section 262 and will nullify any previously delivered written demand for appraisal under Section 262.

Revocation of Proxies

You may revoke your proxy and/or change your vote at any time before your shares are voted at the special meeting. If you are a stockholder of record, you can do this by:

 

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sending a written notice stating that you revoke your proxy to Baker Hughes, 2929 Allen Parkway, Houston, Texas 77019, Attention: Vice President and Corporate Secretary, that bears a date later than the date of the proxy and is received prior to the special meeting;

 

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submitting a valid, later-dated proxy by telephone or Internet that is received prior to the special meeting; or

 

•

attending the special meeting and voting by ballot in person (your attendance at the special meeting will not, by itself, revoke any proxy that you have previously given).

If you hold your shares through a broker, nominee, fiduciary or other custodian, you must contact your broker, nominee, fiduciary or other custodian to change your vote or obtain a “legal proxy” to vote your shares if you wish to cast your vote in person at the meeting.

Solicitation of Proxies

This joint proxy statement/prospectus is furnished in connection with the solicitation of proxies by the Baker Hughes Board to be voted at the Baker Hughes special meeting. Baker Hughes will bear all costs and expenses in connection with the solicitation of proxies, including the charges of brokerage houses and other custodians, nominees or fiduciaries for forwarding documents to security owners. Proxies may also be solicited by certain of Baker Hughes’s directors, officers and employees by telephone, electronic mail, letter, facsimile or

 

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in person, but no additional compensation will be paid to them (other than reasonable out of pocket expenses). Baker Hughes has retained D.F. King to assist in the distribution and solicitation of proxies. Baker Hughes will pay D.F. King fees of approximately $15,000, plus reasonable out of pocket expenses, for these services.

Stockholders should not send stock certificates with their proxies. A letter of transmittal and instructions for the surrender of Baker Hughes stock certificates will be mailed to Baker Hughes stockholders shortly after the effective time of the merger, if the merger is approved.

Other Business; Adjournments

Under Baker Hughes’s bylaws, the business to be conducted at the special meeting will be limited to the purposes stated in the notice to Baker Hughes stockholders provided with this joint proxy statement/prospectus.

Adjournments may be made for the purpose of, among other things, soliciting additional proxies. If a quorum is present, adjournment may be made by the chairman of the meeting, or by the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote thereon. If a quorum is not present, a majority of the voting stock represented in person or by proxy, or the chairman of the meeting, may adjourn the meeting until a quorum is present. Baker Hughes is not required to notify stockholders of any adjournment of 30 days or less if the time and place of the adjourned meeting are announced at the meeting at which the adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At any adjourned meeting, Baker Hughes may transact any business that it might have transacted at the original meeting. Proxies submitted by Baker Hughes stockholders for use at the special meeting will be used at any adjournment or postponement of the meeting. Unless the context otherwise requires, references to the Baker Hughes special meeting in this joint proxy statement/prospectus are to such special meeting as adjourned or postponed.

Baker Hughes Stockholder Account Maintenance

Baker Hughes’s transfer agent is Computershare Shareowner Services LLC. All communications concerning accounts of Baker Hughes stockholders of record, including address changes, name changes, inquiries as to requirements to transfer shares of common stock and similar issues can be handled by calling Computershare Shareowner Services LLC toll-free at (888) 216-8057.

 

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THE PROPOSED MERGER

General

Halliburton and Baker Hughes agreed to the acquisition of Baker Hughes by Halliburton under the terms of the merger agreement that is described in this joint proxy statement/prospectus. Under the terms of the merger agreement, Baker Hughes will merge with and into Merger Sub. As a result, Merger Sub will survive the merger and will continue to exist as a wholly owned subsidiary of Halliburton (sometimes referred to as the merger). If Halliburton and Baker Hughes determine to effect the merger through an alternative structure, the parties may amend the merger agreement as is required to permit the parties to effect such alternative structure. The parties will only agree to an alternative structure, however, if it would not affect the consideration paid to Baker Hughes stockholders or otherwise materially alter the terms of the merger and provided that they will receive the same opinions from legal counsel that they would be receiving with respect to the current structure for the merger, including an opinion to the effect that the merger will qualify as a “reorganization” for United States federal income tax purposes within the meaning of Section 368(a) of the Internal Revenue Code.

The Halliburton Board is using this joint proxy statement/prospectus to solicit proxies from the holders of Halliburton common stock for use at the Halliburton special meeting. The Baker Hughes Board is using this joint proxy statement/prospectus to solicit proxies from the holders of Baker Hughes common stock for use at the Baker Hughes special meeting. This joint proxy statement/prospectus also forms a part of the registration statement which will be used by Halliburton in connection with the offering of Halliburton common stock if the merger is completed.

Halliburton Merger Proposal

At the Halliburton special meeting, holders of shares of Halliburton common stock will be asked to vote on the issuance of shares of Halliburton common stock as contemplated by the merger agreement.

The merger will not be completed unless Halliburton stockholders approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement.

A separate vote by the holders of Halliburton common stock on the merger agreement or the merger itself is not required under Delaware law.

Baker Hughes Merger Proposal

At the Baker Hughes special meeting, holders of shares of Baker Hughes common stock will be asked to vote on, among other things, the adoption of the merger agreement and thereby approve the merger.

The merger will not be completed unless Baker Hughes stockholders adopt the merger agreement and thereby approve the merger.

Merger Consideration

Common Stock

Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each share of Baker Hughes common stock issued and outstanding immediately prior to the effective time of the merger (other than dissenting shares as described in “Appraisal Rights of Baker Hughes Stockholders” and other than shares held in Baker Hughes’s treasury or owned by Halliburton or any subsidiary of Baker Hughes or Halliburton, which will be cancelled for no consideration) will be converted into the right to receive (i) 1.12 shares of Halliburton common stock and (ii) $19.00 in cash, collectively referred to as the merger consideration.

 

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Based on the number of shares of Baker Hughes common stock outstanding as of February 12, 2015, and the number of shares of Baker Hughes common stock underlying equity awards outstanding as of February 12, 2015, and based on the assumption that no options to purchase Baker Hughes common stock are exercised prior to completion of the merger, at the closing of the merger Halliburton will issue approximately 490 million shares of Halliburton common stock and will pay approximately $8.3 billion in cash to Baker Hughes stockholders. The shares of Halliburton common stock to be issued to Baker Hughes stockholders will represent approximately 37% of the Halliburton common stock outstanding immediately after the merger. Those amounts will be adjusted depending on the actual number of shares of Baker Hughes common stock and equity-based awards outstanding at the effective time of the merger.

Fractional shares of Halliburton common stock will not be delivered pursuant to the merger. Instead, each holder of shares of Baker Hughes common stock who would otherwise be entitled to receive a fractional share of Halliburton common stock pursuant to the merger will be entitled to receive a cash payment, in lieu thereof, in an amount that will represent such fraction rounding to the nearest ten thousandth of a share multiplied by the market price of a share of Halliburton common stock rounded to the nearest whole cent, calculated based on the volume-weighted average price per share of Halliburton common stock on the NYSE for the five most recent trading days ending on the third full trading day before the closing of the merger.

The merger consideration represented a value of $65.16 based on the volume-weighted average price for Halliburton common stock on the NYSE for the 20 trading days ended February 12, 2015. This represents a premium of approximately 4% to the closing stock price of Baker Hughes on February 12, 2015, and an approximately 10% premium to the volume-weighted average stock price of Baker Hughes over the last 20 trading days ending February 12, 2015. The value of the consideration to be received by Baker Hughes stockholders will fluctuate with changes in the price of Halliburton common stock. The estimated merger consideration is approximately $66.90 based on Halliburton’s closing share price of $42.77 on February 12, 2015. This represents a premium of approximately 7% to the closing stock price of Baker Hughes on February 12, 2015, and an approximately 13% premium to the volume-weighted average stock price of Baker Hughes over the last 20 trading days ending February 12, 2015. Halliburton and Baker Hughes urge you to obtain current market quotations for Halliburton and Baker Hughes common stock.

Adjustments

The merger consideration will be equitably adjusted to provide holders of shares of Baker Hughes common stock with the same economic effect contemplated by the merger agreement if, at any time between the signing and the effective time of the merger, there is any change in the outstanding shares of capital stock of Baker Hughes or Halliburton by reason of any reclassification, recapitalization, split-up, combination, exchange of shares or similar readjustment within such period, or a stock dividend with a record date during such period.

Treasury Shares; Shares Owned by Halliburton

At the effective time of the merger, each share of Baker Hughes common stock (i) held as a treasury share by Baker Hughes, (ii) owned of record by any subsidiary of Baker Hughes, or (iii) owned of record by Halliburton will, in each case, be cancelled, and no consideration will be delivered in exchange for those shares.

Background of the Merger

The boards of directors and senior management teams of each of Halliburton and Baker Hughes regularly review and assess their respective company’s operations, performance, prospects and strategic direction. In connection therewith, they consider potential strategic alternatives, including potential business combinations, to strengthen their respective businesses and maximize stockholder value. From time to time, and most recently in 2005, Halliburton and Baker Hughes have had substantive discussions about a potential business combination involving the two companies. Prior to October 2014, however, these discussions never progressed beyond an initial exploratory phase and did not involve the exchange of specific financial proposals for such a transaction.

 

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In January 2014, a mutual stockholder of Halliburton and Baker Hughes approached David J. Lesar, Chairman and Chief Executive Officer of Halliburton, and suggested that Halliburton consider acquiring Baker Hughes. Members of Halliburton management subsequently met with representatives of the stockholder, and the stockholder explained its rationale for an acquisition. Members of Halliburton management gave preliminary consideration to the possible acquisition, briefed Halliburton’s Board and decided not to pursue a possible acquisition of Baker Hughes in light of the relative trading prices of the stock of the two companies at the time.

In June 2014, in light of changes in the relative trading prices of Halliburton and Baker Hughes common stock, members of Halliburton management began to consider a possible acquisition of Baker Hughes. Members of Halliburton management met with representatives of Credit Suisse to discuss a potential business combination with Baker Hughes, including possible approaches and strategies for engaging in discussions with Baker Hughes. This was the first time since 2005 that Halliburton management gave serious consideration to a possible combination of the companies. During the following weeks, members of Halliburton management held internal discussions and analyzed such an acquisition.

On August 14, 2014, representatives of Credit Suisse met with members of Halliburton management to discuss a potential business combination of Halliburton and Baker Hughes. Among other things, representatives of Credit Suisse discussed certain considerations relating to pursuing an acquisition on an unsolicited basis, including a review of Baker Hughes’s structural takeover defenses and an indicative timeline for a transaction.

During August and September 2014, members of Halliburton management, Credit Suisse and Baker Botts L.L.P. (sometimes referred to in this joint proxy statement/prospectus as Baker Botts), Halliburton’s outside counsel, worked to develop a framework for a potential transaction, including analyzing the combination from a regulatory perspective and planning for both a negotiated and an unsolicited transaction. On September 17, 2014, Halliburton formally engaged Credit Suisse as its lead financial advisor with respect to potential transactions involving Baker Hughes.

Also on September 17, 2014, at a meeting of the Halliburton Board, members of Halliburton’s management made a presentation with respect to a proposed acquisition of Baker Hughes, including key financial metrics, the strategic rationale for the transaction and the potential consolidation benefits and value creation of combining the two companies. Representatives of Baker Botts reviewed with the Halliburton Board its duties with respect to any such transaction and, together with representatives of Credit Suisse, reviewed the potential terms of a transaction and strategies for completing the transaction. Baker Botts representatives also made a presentation about certain regulatory considerations with respect to a potential transaction. Among other things, the advisors reviewed a potential strategy and timeline for completing an unsolicited transaction should Baker Hughes be unwilling to engage in discussions regarding a combination, which included the possible nomination of an alternative slate of directors to stand for election at Baker Hughes’s next annual meeting of stockholders, which potentially could facilitate Halliburton’s ability to present an acquisition proposal directly to Baker Hughes stockholders. The discussions noted that November 14, 2014 was the advance notice deadline for Baker Hughes stockholders to submit nominations for directors, as determined in accordance with Baker Hughes’s bylaws. The Halliburton Board authorized Halliburton management to take steps in furtherance of an acquisition of Baker Hughes, with the consideration therefor to be paid in Halliburton common stock or a combination of Halliburton common stock and cash, including the proposal in the October 13, 2014 letter from Mr. Lesar to Mr. Craighead described below.

In the following weeks, Halliburton and its advisors continued to analyze and prepare for a potential transaction, including by Baker Botts conducting additional legal analysis with respect to regulatory issues arising from the transaction.

During the week of October 6, 2014, Halliburton engaged Wachtell, Lipton, Rosen & Katz (sometimes referred to in this joint proxy statement/prospectus as Wachtell) and Young Conaway Stargatt & Taylor, LLP to act as additional legal counsel, Joele Frank Wilkinson Brimmer Katcher to provide public relations assistance,

 

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NERA Economic Consulting (sometimes referred to in this joint proxy statement/prospectus as NERA) to assist with analyzing antitrust matters, and MacKenzie Partners, Inc. and Innisfree M&A Incorporated to provide proxy solicitation and related services. In addition, on October 13, 2014, Halliburton engaged BofA Merrill Lynch to act as an additional financial advisor with respect to the transaction and the lead financial advisor with respect to any financing relating to the transaction.

On October 10, 2014, Mr. Lesar called Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes, to request a meeting for Monday, October 13. In response to a question from Mr. Craighead, Mr. Lesar stated that the purpose of the meeting was to discuss a potential combination of the two companies. Robb L. Voyles, Executive Vice President and General Counsel of Halliburton, subsequently sent a note to the Halliburton Board informing them of this development, and during the following weeks he continually updated the Halliburton Board with respect to material developments.

On October 13, 2014, Mr. Lesar met with Mr. Craighead and delivered a letter setting forth a non-binding proposal for Halliburton to acquire Baker Hughes in a cash and stock transaction, with the consideration consisting of a fixed exchange ratio of 1.05 Halliburton shares plus $19.00 cash per Baker Hughes share, representing a value of $76.00 per Baker Hughes share based on Halliburton’s closing price on October 10, 2014, and reflecting an approximately 34.1% premium based on October 10, 2014 closing prices, which were $56.68 for Baker Hughes and $54.29 for Halliburton. The letter provided by Mr. Lesar stated the following:

Dear Martin:

As you and I discussed, I am writing on behalf of the Board of Directors of Halliburton Company to propose a business combination of Halliburton and Baker Hughes. Under our proposal, Halliburton would acquire all outstanding shares of Baker Hughes in a cash and stock transaction consisting of a fixed exchange ratio of 1.05 Halliburton shares plus $19.00 cash for each Baker Hughes share. This offer represents value of $76.00 per Baker Hughes share, reflects a 34.1% premium to Friday’s closing price and exceeds Baker Hughes’s highest historical trading price during the last three years. Baker Hughes’s shareholders will not only recognize immediately a substantial premium, but also will have the opportunity to participate in the significantly enhanced value of the combined company.

This combination presents a compelling strategic opportunity to create the leading oilfield services company offering a comprehensive suite of products and services to the global upstream oil and gas industry. The combination would benefit both companies’ shareholders and customers worldwide and create a must-own stock for investors in the oilfield services sector.

The combination will leverage Halliburton’s and Baker Hughes’s complementary strengths to create a company with an unsurpassed breadth and depth of products and services.

The combination of Baker Hughes and Halliburton presents an excellent business fit from the standpoint of product lines, global reach and cutting-edge technological developments in the worldwide oil and gas industry. Baker Hughes’s strengths complement those of Halliburton and offer an opportunity to combine Halliburton’s strong pressure pumping and drilling fluids with Baker Hughes’s outstanding offerings in artificial lift, specialty chemicals and directional drilling. The resulting company would combine two highly complementary businesses and provide a full breadth of products and services, enabling it to offer a comprehensive solution to customers in every oil and gas-producing market worldwide. This strategic combination would create the worldwide leader in the oilfield services industry, with superior positions in key business lines, a fully integrated product and services platform, increased capabilities in the unconventional and deepwater sectors, substantial and improved growth opportunities and continued high returns on capital.

 

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The combination generates significant opportunities for synergies and increased cash returns to shareholders.

In addition to the compelling premium your shareholders will receive immediately in the transaction, we believe the combination will yield significant synergies. The combination will provide substantial efficiencies of scale and geographic scope, particularly in the Eastern Hemisphere, which will enhance fixed cost absorption. Economies of scale and scope provided by a combined company also will allow the optimization of a combined R&D budget. We also believe that applying Halliburton’s efficiency programs to Baker Hughes’s products and service offerings in areas such as logistics and equipment utilization will result in reduced costs that generate meaningful increases in margins and returns on Baker Hughes products and services, enhancing the combined company’s value. Once fully integrated, we expect the combination can yield annual cost synergies of nearly $2 billion. Baker Hughes shareholders, as owners of approximately 35% of the combined company, will benefit as these synergies are realized.

In addition, we expect the acquisition to be accretive to Halliburton cash flow by the end of the first year after closing and to earnings per share by the end of the second year, even factoring in potential divestitures. We anticipate that the combined company will generate significant free cash flow, allowing the return of cash to our combined investor base through dividends, share repurchases and similar actions.

Regulatory requirements will not diminish the compelling value offered by the combination.

We have dedicated considerable time and resources to analyzing the combination of Halliburton and Baker Hughes, and we are committed to making necessary divestitures. Our nationally recognized antitrust counsel and economic experts have analyzed the transaction, and we are confident that a combination of the two companies is very achievable from a regulatory standpoint. We have carefully evaluated likely divestitures needed to obtain regulatory approvals and are prepared to commit to make those divestitures. We believe that anticipated divestitures will not prevent the combined company from achieving its strategic goals or detract from the compelling value offered by the combination. We have identified a number of potential buyers that we believe will be very interested in the businesses that may need to be divested and expect that those businesses should all obtain excellent prices in expedited sales.

The combined company will draw from considerable management talent.

We have high regard for Baker Hughes and its leadership and expect that many of your business leaders will play an important role in the combined organization. We also know many of your Board members and are prepared to discuss adding members of Baker Hughes’s Board to the combined company’s Board of Directors in a negotiated transaction.

The combination will create a bellwether global oilfield service company.

We believe that investors will consider the combined company on par with, and an attractive investment alternative to, Schlumberger, and a “must own” stock for investors with a limited allocation dedicated to the oilfield services sector, which should result in higher trading multiples than either Halliburton or Baker Hughes currently enjoy.

*    *    *    *    *

We are confident that you will conclude that our proposal presents a compelling opportunity for your shareholders to achieve extraordinary short and long term returns. Our Board of Directors has approved the terms of this proposal, and I am personally committed to overseeing the successful integration of the companies into a single enterprise.

 

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We have engaged Credit Suisse and Bank of America Merrill Lynch as our financial advisors, and Baker Botts and Wachtell, Lipton, Rosen & Katz as our legal counsel. Based on discussions with our financial advisors, we are confident in our ability to finance the transaction. Accordingly, our proposal is not subject to any financing contingency.

We are excited about a combination and look forward to your prompt response to our proposal. Both our senior management team and our Board of Directors are committed to taking the actions necessary to complete this combination. As you can appreciate, with a proposal of this type, time is of the essence. We would appreciate hearing from you as soon as practicable after you confer with your Board, but in any event no later than 5:00 p.m., Houston time, on October 20, 2014. I and the rest of our senior management team are available at your convenience to discuss any aspect of the terms and structure of our proposed transaction.

Sincerely,

David J. Lesar

Mr. Lesar informed Mr. Craighead during the meeting that, although Halliburton would prefer a negotiated transaction, Halliburton was also prepared to pursue all options available to Halliburton to complete a transaction with Baker Hughes. Mr. Lesar advised Mr. Craighead that Halliburton had performed a regulatory analysis and, in response to a question from Mr. Craighead, Mr. Lesar discussed the reasons for the timing of the proposal and the strategic benefits of combining the companies in the current environment. At the conclusion of the meeting, Mr. Craighead told Mr. Lesar that he would not be able to respond to Halliburton’s proposal until October 22, rather than October 20 as requested in the letter, because Baker Hughes had previously scheduled a board meeting to be held on October 22, 2014. Mr. Lesar indicated that he understood. Promptly following the meeting, Mr. Craighead notified the Baker Hughes Board of Halliburton’s proposal and scheduled a special meeting of the Baker Hughes Board.

On October 14, 2014, Halliburton acquired 100 shares of Baker Hughes common stock to establish an ownership position to enable Halliburton to nominate an alternative slate of directors.

On October 14, 2014, the Baker Hughes Board held a special meeting to discuss the Halliburton proposal. At the invitation of the Baker Hughes Board, members of senior management and representatives from Goldman, Sachs & Co. (sometimes referred to in this joint proxy statement/prospectus as Goldman Sachs), Baker Hughes’s financial advisor, Akin Gump Strauss Hauer & Feld LLP (sometimes referred to in this joint proxy statement/prospectus as Akin Gump) and Morris, Nichols, Arsht & Tunnell LLP (sometimes referred to in this joint proxy statement/prospectus as Morris Nichols), outside counsel to Baker Hughes, were present. During the meeting, the Baker Hughes Board reviewed the financial terms of Halliburton’s October 13 proposal, as well as Baker Hughes’s financial position and the risks and challenges facing the industry more generally. A representative from Morris Nichols reviewed with the Baker Hughes Board its fiduciary duties. Representatives of Goldman Sachs discussed the context and financial terms of Halliburton’s October 13 proposal, as well as certain financial information concerning Baker Hughes and Halliburton. The Baker Hughes Board decided to schedule a meeting to discuss the proposal in further detail on October 21, 2014 and also to discuss the proposal at its next regularly scheduled meeting on October 22, 2014.

On October 16, 2014, Baker Hughes released its financial results for the third quarter of 2014, reporting adjusted net income per diluted share of $1.02 for the third quarter, versus a $1.15 per share consensus estimate. On October 20, 2014, Halliburton released its financial results for the third quarter of 2014, reporting adjusted net income per diluted share of $1.19 for the third quarter, versus a $1.10 per share consensus estimate. At the close of trading on October 20, Baker Hughes’s share price was $52.65 and Halliburton’s share price was $52.92.

 

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On October 20, 2014, Mr. Lesar sent Mr. Craighead a message that reiterated Halliburton’s commitment to its October 13 proposal, notwithstanding continued market volatility. Mr. Craighead responded that he had notified the Baker Hughes Board of the October 13 proposal and would respond to Mr. Lesar on October 22, 2014.

On October 21, 2014, the Baker Hughes Board held a special meeting to review the proposal from Halliburton. At the invitation of the Baker Hughes Board, members of senior management and representatives from Goldman Sachs, Davis Polk & Wardwell LLP (sometimes referred to in this joint proxy statement/prospectus as Davis Polk) and Wilmer Cutler Pickering Hale and Dorr LLP (sometimes referred to in this joint proxy statement/prospectus as Wilmer Hale), outside counsel to Baker Hughes, also were present. At the meeting, representatives of Goldman Sachs reviewed its preliminary financial analysis of Halliburton’s October 13 proposal and Baker Hughes’s potential strategic alternatives. At the meeting, other potential counterparties for potential strategic transactions were also reviewed. A representative of Wilmer Hale made a presentation to the Baker Hughes Board on the process for review by various antitrust authorities in the United States and abroad of any potential transaction with Halliburton. Representatives of Davis Polk reviewed with the Baker Hughes Board certain legal matters relating to its consideration of a possible transaction with Halliburton.

During the meeting, the Baker Hughes Board also discussed the potential courses of action that Halliburton might pursue, including the possibility that Halliburton might launch a proxy contest for control of the Baker Hughes Board or make an unsolicited public offer for Baker Hughes. The Baker Hughes Board also discussed the opportunities and challenges posed by a potential combination of Halliburton and Baker Hughes, as well as the opportunities and challenges associated with Baker Hughes remaining an independent company. The Baker Hughes Board also discussed potential takeover defenses. Following an extensive discussion, the Baker Hughes Board determined that, before responding to the financial or other terms of Halliburton’s October 13 proposal, they would need first to evaluate the antitrust regulatory risk of the potential transaction in order to determine if such a combination would be feasible. The Baker Hughes Board decided that, with this in mind, the next step would be for the antitrust advisors and experts from both companies to meet and discuss the antitrust regulatory risk further. The Baker Hughes Board authorized Mr. Craighead to contact Mr. Lesar to advise him of its decision on these matters.

On October 22, 2014, the Baker Hughes Board continued its discussion of the proposal from Halliburton and the associated antitrust regulatory risks during its regularly scheduled meeting. The Baker Hughes Board also discussed potential takeover defenses. At the invitation of the Baker Hughes Board, members of senior management were present at the meeting. Later that day, Mr. Craighead met with Mr. Lesar and delivered a letter on behalf of the Baker Hughes Board. During the meeting, Mr. Craighead told Mr. Lesar that the Baker Hughes Board had discussed Halliburton’s proposal, and was open to exploring a potential transaction provided that it could become comfortable that the transaction could receive regulatory approval, but that any discussion of price should take place only after Baker Hughes was comfortable with the approach to regulatory issues. Mr. Craighead expressed concerns to Mr. Lesar regarding the time required for Baker Hughes to complete its analysis of the regulatory issues and the risk of the existence of discussions becoming public. Mr. Craighead informed Mr. Lesar that Baker Hughes had engaged Goldman Sachs as its financial advisor and Wilmer Hale as its legal counsel with respect to antitrust matters. Below is the text of the letter Mr. Craighead delivered to Mr. Lesar:

Dear Dave:

I am writing on behalf of the Board of Directors of Baker Hughes Incorporated in response to your letter dated October 13, 2014. As you said in our conversation that day and recounted in your letter, Halliburton has spent considerable time and resources over the past two years, particularly during the past six months, analyzing the transaction you propose and in formulating the terms of your proposal. The interest of our shareholders requires that we also conduct a thoughtful review and our Board has initiated a process that will provide a thorough analysis of all aspects and potential impacts of your proposal.

 

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Antitrust analysis is clearly critical to considering the viability of your proposal. You spent a significant portion of our brief discussion on October 13 addressing antitrust considerations and noted that your counsel has conducted a comprehensive evaluation and analysis of all associated regulatory aspects. As the next step, we would like to arrange a meeting with your antitrust counsel and experts where they can provide our advisors with a review of that evaluation and analysis. Our respective General Counsels, who know one another, can coordinate that process.

Sincerely,

Martin S. Craighead

That evening and the next day, Mr. Voyles and Alan Crain, Senior Vice President, Chief Legal Officer and Governance Officer of Baker Hughes, discussed arranging a meeting between Baker Botts and Wilmer Hale, the two companies’ respective antitrust counsel, and NERA, to review regulatory issues. Mr. Voyles also informed Mr. Crain that Halliburton had prepared a draft merger agreement that it would send to Baker Hughes for review, as well as a draft confidentiality agreement between the parties to facilitate the exchange of information. Mr. Crain informed Mr. Voyles that the Baker Hughes Board considered antitrust to be a gating issue and had not authorized entering into further discussions until Baker Hughes was satisfied that there was a reasonable path to regulatory approval. Mr. Voyles expressed concern about timing in light of the upcoming deadline in Baker Hughes’s bylaws to nominate directors for election to the Baker Hughes Board and informed Mr. Crain that although Halliburton preferred a negotiated transaction, it most importantly wanted to complete a transaction. Mr. Voyles cautioned Mr. Crain that, if substantial progress was not made in negotiating definitive documentation by November 14, 2014 (the last day a stockholder under Baker Hughes’s bylaws could nominate candidates for election to the Baker Hughes Board at its 2015 annual meeting of stockholders), Halliburton intended to propose nominees for the Baker Hughes Board. Mr. Voyles suggested that Baker Hughes could agree to extend or waive the deadline for director nominations to provide more time to reach a negotiated transaction. Mr. Crain informed Mr. Voyles that Baker Hughes had engaged Davis Polk & Wardwell as M&A counsel for the transaction. After the discussion, Mr. Voyles sent Mr. Crain the draft confidentiality agreement. Later that evening, Mr. Craighead and Mr. Crain telephoned the lead director of the Baker Hughes Board, J. Larry Nichols, to update him on the developments.

On October 24, 2014, Mr. Crain informed Mr. Voyles that he did not believe that a confidentiality agreement was a necessary prerequisite to a meeting regarding antitrust matters, as Baker Hughes did not intend to share non-public information at such meeting, and advised Mr. Voyles that the form of confidentiality agreement (which did not contain a standstill provision) provided by Halliburton was not appropriate, but that at the appropriate time Baker Hughes would be willing to agree to a confidentiality agreement in the same form as had been agreed by the parties in 2005, and subsequently sent Mr. Voyles a copy of that agreement (which agreement contained a mutual standstill agreement for a one-year period). Mr. Voyles later informed Mr. Crain that Halliburton was not willing to enter into a standstill agreement. On the evening of October 24, Mr. Craighead and Mr. Crain telephoned Mr. Nichols to update him on recent developments.

On October 27, 2014, Mr. Voyles informed Mr. Crain that Halliburton was willing to proceed with the meeting on October 30, 2014 without a confidentiality agreement, but would not share any non-public information during the meeting.

On October 30, 2014, Mr. Voyles, Mr. Crain and representatives of Wilmer Hale, Baker Botts and NERA met in Washington, D.C. At the meeting, Baker Botts presented the results of the regulatory analysis performed to date. After the meeting, Mr. Crain told Mr. Voyles that Baker Hughes would continue its analysis of Halliburton’s proposal, and would work toward responding to Halliburton by November 10. Mr. Voyles emphasized that, in Halliburton’s view, time was of the essence, and made clear to Mr. Crain that Halliburton intended to nominate an alternative slate of directors for election to the Baker Hughes Board not later than November 14, 2014 if no merger agreement had been signed by then. Later that evening on October 30, 2014, Mr. Crain telephoned Mr. Nichols to update him on the meeting and subsequent conversation with Mr. Voyles.

 

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On October 31, 2014, Mr. Crain and Mr. Voyles spoke via telephone to discuss the disclosure implications if Baker Hughes were to extend its director nomination deadline. Later on October 31, Mr. Craighead called Mr. Lesar and said that, although he believed that a potential transaction could obtain regulatory approvals, in view of the antitrust issues that a merger of Baker Hughes and Halliburton would present, antitrust risk allocation and specifics needed to be worked out prior to the negotiation of other business issues. He further advised Mr. Lesar that Baker Hughes would continue to review all aspects of the potential transaction and would provide a board-authorized response to Halliburton’s proposal on November 10, 2014.

On November 3, 2014, Mr. Lesar sent the following letter to Mr. Craighead:

Dear Martin:

I am writing to highlight the risks we see involved in any further delays in progress toward a negotiated transaction.

Since speaking with you on October 31, I have reviewed the current timetable with our advisors and have become convinced that we may be headed to an unfortunate conflict as a result of your timetable for responding to our proposal.

On October 13, Halliburton presented a written proposal to Baker Hughes to acquire the company. At that time, we requested a response by October 20. However, at your request, we agreed to extend that date to October 22 in order to allow you to meet with your Board.

On October 22, you advised that Baker Hughes’ Board was open to our proposal, but believed that antitrust was a gating issue that needed to be addressed. To that end, we proposed to have our respective antitrust lawyers meet as early as October 24, but were told by Baker Hughes that its antitrust counsel would be unavailable until October 30.

On October 30, our respective antitrust legal teams and general counsels met in Washington DC. The teams met for about six hours and reviewed a detailed presentation from Sean Boland and his team.

On October 31, you called me and communicated that your counsel had concluded that antitrust was not a “showstopper” (although you were clear that risk allocation and specifics must be worked out). You also advised that you would be traveling for a week and that you would convey your Board’s response to our proposal on November 10.

In addition, since our first contact, our respective general counsels have had several discussions in which we stressed the time sensitivity created by deadlines in Baker Hughes’ bylaws, and suggested various paths to progress the transaction while your antitrust evaluation was ongoing. We informed you that we have prepared a draft merger agreement and are prepared to send it for Baker Hughes’ review, we provided a mutual confidentiality agreement for Baker Hughes’ consideration and we proposed conducting mutual legal due diligence. Baker Hughes has deferred each of these proposals to progress the transaction.

In the three weeks since we have made our proposal, we have seen little progress toward a transaction, other than the antitrust meeting. We are now told that we must wait another 10 days for any further progress toward a transaction. We do not understand why so little has occurred in the last three weeks, or why it will take until November 10 to respond to our proposal.

Specifically, even were Baker Hughes to tell us on November 10 that it is ready to engage in real discussions on our proposal, there may simply be insufficient time to do the things that need to be done to negotiate and execute a merger agreement prior to the end of the advance notice period for director nominations imposed by your bylaws.

 

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We have consistently said in our written proposal and discussions that we prefer a friendly transaction, but we are committed to consummating a transaction. We have tremendous respect for your Board, but in the absence of an executed merger agreement, our nominating alternative directors is the only way to meaningfully present this opportunity to your shareholders. We have assembled a strong slate of director nominees, and if we do not have an executed merger agreement or an enforceable extension of the nomination deadline, we will have no choice but to nominate a slate of directors in conformity with Baker Hughes’ bylaws.

For the reasons described above, we believe that waiting to begin negotiations until November 10 is likely to lead to an unavoidable conflict between our companies, even if we both want a friendly transaction. We urge you to engage in substantive discussions with us prior to November 10, so that we are in a position to announce a negotiated transaction before your November 14 advance notice deadline. To this end, we will send your general counsel a proposed merger agreement in hopes that it will assist your evaluation of our proposal and enable meaningful progress toward a transaction.

You have suggested that we have not allowed sufficient time for your evaluation of our proposal. While we respect that sentiment, and are fully cognizant of your Board’s duties, we disagree. Our two companies have considered combining in the past, and know each other extremely well. The strategic rationale is undeniable and the synergy potential is substantial. We offered a compelling premium in our initial proposal, which was designed to be easy to say yes to. Despite Baker Hughes’ earnings that surprised investors, we reaffirmed our proposal, and the premium has now increased to 45%.

We would urge you to engage with us in meaningful negotiations on all fronts promptly, so we do not reach the expiration of your advance notice period without a merger agreement.

Sincerely,

David J. Lesar

Later that afternoon, Mr. Voyles sent the initial draft merger agreement to Mr. Crain. On the evening of November 3, 2014, Mr. Crain telephoned Mr. Nichols to update him on the letter from Mr. Lesar.

On the morning of November 4, 2014, Mr. Craighead and Mr. Crain telephoned Mr. Nichols to discuss the letter from Mr. Lesar further, a potential response and other recent developments. Later that day, Mr. Craighead sent the following letter to Mr. Lesar:

Dear Dave:

I am writing on behalf of the Board of Directors of Baker Hughes Incorporated in response to your letter of yesterday, November 3. Your letter demonstrates that despite the fact that we have approached your acquisition proposal with full dedication, responding expeditiously and with an open mind, Halliburton insists on pressuring our Board to make a decision without the full and careful consideration necessary to protect our stockholders.

The threshold question is whether Halliburton has offered compelling financial consideration commensurate with the overall value of Baker Hughes and the risks associated with your proposal. In addition, we have both agreed that a combination of Halliburton and Baker Hughes will raise significant issues under the antitrust laws of the United States and other jurisdictions. Your proposal has numerous complexities and it remains unclear whether there are workable solutions that appropriately address the antitrust risk and the completion risk. All these factors must be as carefully analyzed by our Board, with the assistance of our financial and legal advisors, as they have been analyzed by your board and advisors over an extended period of many months.

 

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Finally, the timing predicament with respect to director nominations, which Halliburton asserts that it is facing, is one of its own making. The November 14 nomination deadline in our bylaws is clear and a matter of public record. After having taken the time Halliburton felt it needed to prepare its proposal, it chose to inform Baker Hughes of its intention when it would create an unrealistic timing situation and then attempted to impose deadlines that are inconsistent with both the realities of a large, complex transaction of this type and the appropriate review we owe our stockholders. Please understand that our Board is working to ensure optimal value creation for our stockholders and their decision cannot and will not be dictated by anyone else’s timing.

Numerous points in your letter mischaracterize our dialogue to date and inhibit an even-handed discussion. I note some of these below, not in an attempt to be argumentative but simply to emphasize a few points.

 

•

The statement about the unavailability of our antitrust counsel to meet with your antitrust counsel is incorrect. Our counsel offered to rearrange her schedule to meet three days earlier than the October 30 meeting date. Her offer was declined by your representatives. In any case, the meeting on October 30 was valuable.

 

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Nearly two weeks ago I advised you that I had a long-planned, overseas business trip, but that I would have a team working diligently to analyze your proposal and they would continue to do so during my absence. Our team has done exactly that, continues the process of doing so, and I am in constant contact with them each day.

 

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As our chief legal officer has communicated to your general counsel, we do not believe that our by-laws governing the deadline for you to notify us of director nominations may be amended or waived without our publicly disclosing such action and your acquisition proposal. We strongly disagree with your suggestion to the contrary.

 

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Our chief legal officer has explained to your general counsel in writing on multiple occasions that the draft confidentiality agreement proposed by Halliburton is inappropriate for the transaction you propose but that Baker Hughes is prepared to execute a confidentiality agreement in the form of one previously signed by both companies in 2005 that pertained to potential discussions regarding such a transaction. As a courtesy, he provided a copy of that agreement to your general counsel when requested.

We have made progress in analyzing both the regulatory and financial aspects of your proposal. We are proceeding with this review and consideration. As you must realize, much of our progress is internal and very time consuming, including reviewing your valuation proposal and claims of potential synergies with our financial advisors and considering and analyzing the range of antitrust risks and potential remedies. Meetings and discussions with you are not the predominant measure of progress, and the meetings you are requesting would be premature until we have fully prepared for them. Let me assure you that we are moving with great effort and speed in order to be properly prepared as soon as possible if it makes sense for us to fully engage together in the coming days.

As I have previously told you, our Board is analyzing and discussing this proposal, and we will respond to you by November 10. Given the many months of internal analysis and consideration by Halliburton to address the issues associated with your proposal before you even contacted us, it is not reasonable to suggest that our efforts to respond in less than a month from receiving it is in any way unreasonable.

Sincerely,

Martin Craighead

 

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On November 5, 2014, Mr. Lesar sent Mr. Craighead the following message:

Martin--We have made our views clear and remain willing to engage with you this week on our extremely attractive proposal. Rather than respond to the inaccuracies in your letter, we prefer to focus on how to move forward together on our proposal. In that regard, we look forward to receiving your favorable response to our proposal on or before November 10 so that we can promptly bring to fruition a transaction that benefits both of our companies and their respective stockholders.

On November 6, 2014, the Baker Hughes Board held a special meeting. At the invitation of the Baker Hughes Board, members of senior management and representatives of Goldman Sachs, Davis Polk, Wilmer Hale, Morris Nichols and Akin Gump also were present. During the meeting, the directors and their advisors discussed the correspondence and communications between Halliburton and Baker Hughes to date, as well as their advisors’ ongoing antitrust analysis. A representative from Wilmer Hale summarized the October 30, 2014 meeting and discussed potential questions that could be raised by relevant governmental authorities in connection with the potential transaction and the actions that potentially could be taken to respond to antitrust questions. Representatives of Goldman Sachs reviewed its preliminary financial analysis of the proposal. Representatives from Davis Polk discussed the fiduciary duties of the Baker Hughes Board. The Baker Hughes Board decided to discuss the proposal and their response in further detail at a special meeting of the board scheduled for November 8, 2014.

On November 8, 2014, the Baker Hughes Board held a special meeting to discuss Halliburton’s proposal in further detail. At the invitation of the Baker Hughes Board, representatives from Goldman Sachs, Davis Polk, Wilmer Hale, Morris Nichols and Akin Gump also were present. A representative from Wilmer Hale discussed potential questions that could be raised by relevant governmental authorities in connection with the potential transaction and actions that potentially could be taken to address such questions. During the meeting, representatives of Goldman Sachs reviewed its preliminary financial analysis of Halliburton’s proposal and Baker Hughes’s potential strategic alternatives. After extensive discussions, the Baker Hughes Board unanimously determined that Halliburton’s proposal did not adequately reflect the value of Baker Hughes and that the draft merger agreement proposed by Halliburton did not adequately address Halliburton’s obligation to take actions in response to issues raised by governmental authorities over antitrust issues and certainty of closing or provide compensation to Baker Hughes if the proposed transaction failed to close due to a failure to obtain required antitrust approvals. The Baker Hughes Board determined that it was in the best interests of Baker Hughes’s stockholders to negotiate a reverse termination fee that would be payable by Halliburton to Baker Hughes if any proposed transaction did not close due to a failure to obtain required antitrust approvals and another reverse termination fee that would be payable by Halliburton to Baker Hughes in the event that Halliburton’s stockholders did not approve the transaction. The Baker Hughes Board then authorized Mr. Craighead to contact Mr. Lesar to express its determination.

On November 9, 2014, Mr. Craighead and Mr. Lesar met in person and Mr. Craighead delivered the following letter to Mr. Lesar:

Dear Dave,

I am writing on behalf of the Board of Directors of Baker Hughes Incorporated. The Board, with the assistance of its advisors has reviewed and thoroughly considered your October 13 proposal. Our Board believes your proposal does not adequately reflect the value of Baker Hughes. In addition, while you have expressed confidence in successfully resolving the significant antitrust issues inherent in your proposal, the draft merger agreement you sent us does not adequately address certainty of closure nor does it provide any compensation to Baker Hughes should a proposed transaction fail to close. Accordingly, we find that your current proposal is not in the best interests of Baker Hughes and its stockholders.

As previously discussed, our Board remains open minded to the possibility of discussions concerning a possible transaction once you have communicated a revised outline of key terms that our Board considers to

 

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be at an acceptable level. Those terms must include a reverse termination fee to compensate Baker Hughes for the time, effort and business disruption of a failed process in the event the transaction does not obtain all necessary approvals, your agreement to accommodate all demands of any relevant governments (world-wide), and a termination fee payable in the event that the stockholders of Halliburton vote against any transaction. In summary, we are willing to promptly engage with you, but only if the price and terms provide a basis for discussions.

Sincerely,

Martin S. Craighead

Mr. Craighead also told Mr. Lesar at the meeting that Halliburton should increase its proposal significantly but did not propose a price in response to Halliburton’s initial price proposal. Mr. Lesar expressed his view that Halliburton had already proposed a full and fair price and asked Mr. Craighead to be more specific. Mr. Lesar said that he would meet with his advisors and respond to Mr. Craighead. Mr. Craighead also stated that Baker Hughes would require that Halliburton agree in the merger agreement to a “hell or high water” covenant committing to take any action required to obtain antitrust approvals, and to pay a reverse termination fee in the event that the transaction did not close due to a failure to obtain required antitrust approvals. He also said that Baker Hughes would require that Halliburton pay a reverse termination fee if Halliburton’s stockholders did not approve the transaction.

On November 9 and 10, 2014, Mr. Voyles and Mr. Crain had a number of discussions regarding the antitrust efforts covenant, a reverse termination fee payable to Baker Hughes in the event the transaction could not be completed due to a failure to obtain required antitrust approvals, a reverse termination fee payable to Baker Hughes in the event Halliburton’s stockholders did not approve the transaction and a termination fee payable to Halliburton in the event Baker Hughes terminated the agreement and entered into an alternative transaction. Mr. Crain initially proposed to Mr. Voyles that Halliburton agree to a “hell or high water” covenant, to pay Baker Hughes a reverse termination fee of $5 billion in the event the transaction could not be completed due to a failure to obtain required antitrust approvals and to pay a reverse termination fee of $3 billion should Halliburton’s stockholders fail to vote to approve the transaction. He also said that Baker Hughes had reviewed the draft merger agreement Halliburton had provided and was prepared to send comments to Halliburton if the parties reached an understanding on the termination fees. Mr. Voyles informed Mr. Crain that Halliburton would agree to pay a reverse termination fee of $750 million should its stockholders fail to approve the transaction, provided that Baker Hughes would agree to the same termination fee in the event of termination of the merger agreement relating to an alternative proposal to acquire Baker Hughes. Mr. Voyles also said that Halliburton was not willing to agree to the requested “hell or high water” covenant or to a reverse termination fee of the size requested, but would agree to divest or take other actions with respect to assets or businesses accounting for up to $6 billion in revenue (“detriment limit”), which was substantially in excess of the level of divestitures Halliburton believed would be required, and to pay a reverse termination fee of $1.5 billion in the event the transaction could not be completed due to a failure to obtain required antitrust approvals. Mr. Crain told Mr. Voyles that Baker Hughes would be willing to agree in concept with the idea of a maximum amount of divestitures (as opposed to a “hell or high water” covenant to obtain required antitrust approvals) so long as the reverse termination fee amounts for antitrust failure and a failure to obtain approval of Halliburton’s stockholders were at a level acceptable to Baker Hughes.

On November 10, 2014, Mr. Crain made a counter-proposal to Mr. Voyles, proposing a detriment limit of $9 billion, a reverse termination fee in the event the transaction could not be completed due to a failure to obtain required antitrust approvals of $5 billion and a reverse termination fee of $2.8 billion should Halliburton’s stockholders fail to approve the transaction. Later that day, Mr. Crain sent a message to Mr. Voyles reiterating Baker Hughes’s position that it must have adequate reverse termination fees to compensate for the damage and disruption it would suffer if required antitrust approvals could not be obtained or if Halliburton’s stockholders

 

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did not approve the transaction. Mr. Crain noted that, while Halliburton’s most recent proposed reverse termination fees were well below what Baker Hughes felt was adequate, if such fees were set at an adequate level, Baker Hughes saw the logic in agreeing on a specific level of divestitures that Halliburton would commit to undertake to obtain required antitrust approvals. Accordingly, Baker Hughes abandoned its request for a “hell or high water” antitrust provision and accepted the concept of an agreed upon maximum amount for divestitures.

Later that day, Mr. Voyles contacted Mr. Crain and requested that Mr. Crain reconsider the request for a detriment limit of $9 billion, as it exceeded the amount of any divestiture requirements expected by Halliburton. He further informed Mr. Crain that Halliburton’s agreement to a detriment limit in excess of the $6 billion previously offered by Halliburton would be contingent on a reverse termination fee of not more than $3 billion for failure to obtain antitrust regulatory approval, a $1.2 billion reverse termination fee that would be payable by Halliburton to Baker Hughes in the event that Halliburton’s stockholders did not approve the transaction, and Baker Hughes’s agreement to pay a termination fee of $1 billion in the event of termination relating to an alternative proposal to acquire Baker Hughes.

The next morning, November 11, 2014, Mr. Crain called Mr. Voyles to propose a detriment limit of $7.5 billion, a reverse termination fee for regulatory reasons of $4 billion and a reverse termination fee of $1.5 billion should Halliburton’s stockholders fail to approve the transaction. He also proposed that Baker Hughes’s termination fee would be $1 billion in the event of a termination relating to an alternative proposal to acquire Baker Hughes. Mr. Voyles responded with a proposed detriment limit of $7.5 billion, a reverse termination fee in the event the transaction could not be completed due to a failure to obtain required antitrust approvals of $3.5 billion, a reverse termination fee that would be payable by Halliburton to Baker Hughes in the event that Halliburton’s stockholders did not approve the transaction of $1.5 billion, and a termination fee by Baker Hughes of $1 billion if Baker Hughes terminated the agreement in connection with an alternative transaction. Mr. Voyles made it clear to Mr. Crain during the discussions that Halliburton was only willing to agree to pay reverse termination fees at such levels if Baker Hughes agreed to pay Halliburton a $1 billion termination fee if Baker Hughes terminated the agreement in connection with an alternative transaction. Messrs. Voyles and Crain agreed to recommend such proposal on the termination fees to their respective boards of directors, subject to the companies reaching agreement on price and other terms of the merger agreement. Mr. Crain updated Mr. Nichols throughout the aforementioned discussions.

In the early afternoon of November 11, 2014, Mr. Crain sent Mr. Voyles Baker Hughes’s comments to the draft merger agreement previously prepared and sent by Halliburton.

On the afternoon of November 11, 2014, the Baker Hughes Board held a special meeting. At the invitation of the Baker Hughes Board, members of senior management and representatives of Goldman Sachs, Davis Polk, Wilmer Hale and Akin Gump also were present. During the meeting, Mr. Craighead and Mr. Crain updated the Baker Hughes Board on recent developments in discussions with Halliburton, including the conversations with Mr. Voyles regarding the reverse termination fees, termination fee and antitrust efforts covenant. Following discussion, the Baker Hughes Board provided management and their advisors with guidance on the next steps in negotiations with Halliburton.

At the close of trading on November 11, Baker Hughes’s share price was $51.48 and Halliburton’s share price was $53.72. On the evening of November 11, Mr. Craighead and Mr. Lesar met in person, and Mr. Craighead informed Mr. Lesar that he would be able to support a transaction if the consideration per Baker Hughes share were increased from 1.05 shares of Halliburton common stock to 1.20 shares of Halliburton stock, with the amount of cash per share remaining at $19.00. Mr. Craighead’s proposal represented a value of $83.46 per Baker Hughes share and a 62.1% premium to Baker Hughes’s closing price on November 11, 2014. Mr. Lesar informed Mr. Craighead that Halliburton was not willing to consider that offer.

 

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On the morning of November 12, 2014, representatives from Credit Suisse and Goldman Sachs, on behalf of Halliburton and Baker Hughes, respectively, had a conference call to discuss Mr. Craighead’s most recent proposal. Later that morning, Mr. Lesar sent Mr. Craighead the following email:

Martin

Having reflected on our meeting last evening, I wanted to promptly respond to your counterproposal on price. I must say it was an amount that shocked me and clearly is one that we cannot accept. As we discussed, our price proposal on October 13 was compelling when it was made and has only become more compelling since that time. As of the close yesterday, our proposal provides your shareholders a return in excess of 46% based on current price and similar returns based on 3 and 5 year trading averages. Your shareholders also will have the opportunity to participate in 35% of what we both agree will be the significant upside of the combination. I encourage you and your Board to accept our proposal. If we have not received a reasonable response to our proposal by 3 p.m. today, I will consider it to be rejected and move forward with the process that allows your shareholders to consider it.

Later that morning, Halliburton sent a revised draft of the merger agreement to Baker Hughes, reflecting Halliburton’s response to Baker Hughes’s comments, other than with respect to employee benefits matters, which the parties had agreed would be discussed separately.

In the afternoon on November 12, 2014, the Baker Hughes Board held a special meeting to consider Mr. Lesar’s message and a possible response thereto, the meeting between Mr. Lesar and Mr. Craighead on November 11, 2014 and the conference call between representatives of Credit Suisse and Goldman Sachs on the morning of November 12, 2014. At the invitation of the Baker Hughes Board, members of senior management and representatives of Goldman Sachs, Davis Polk, Morris Nichols, Wilmer Hale and Akin Gump also were present. Following extensive discussion, the Baker Hughes Board concluded that if Halliburton continued to refuse to increase its proposal while threatening to go public with its proposal, Baker Hughes should, in order to maximize leverage with Halliburton and thus maximize stockholder value, publicly disclose Halliburton’s proposal, Baker Hughes’s responses thereto and Halliburton’s continued refusal to increase its proposal.

Following the meeting, and at the direction of the Baker Hughes Board, Mr. Craighead sent the following message to Mr. Lesar:

Dave

I acknowledge receipt of your email of 10:53 this morning. I am very disappointed by your complete unwillingness to show any flexibility on your initial value proposal, but have discussed your message with our Board.

Your initial (and only) value proposal of October 13 was not and is not at an adequate value level and therefore, for that reason alone, not in the best interests of the stockholders of Baker Hughes.

I reiterated to you last Sunday that, after careful review, our Board was concerned with value, and with certainty of closure, given the very significant antitrust risk we both see associated with the potential transaction. Through our teams’ respective efforts we have made substantial progress in key areas, but not with respect to value to the [Baker Hughes] stockholders.

1. We have constructively engaged in addressing areas of antitrust risk (including a lengthy meeting of our antitrust counsel), and have reached an understanding acceptable to both parties.

2. We have also responded to your counsel’s draft merger agreement by providing a complete markup - a markup that you have acknowledged provides a basis for a speedy negotiation.

 

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3. But, in response to our value counterproposal, you continue to be unwilling to improve your first and only proposal.

Our Board has signaled a clear willingness to negotiate and I have very constructively pursued the matter to facilitate reaching an acceptable value level that will enable our board to accept a transaction. We continue to believe in the strong future of Baker Hughes and, at the appropriate value level, would share your excitement about the possibility of combining Baker Hughes and Halliburton for the benefit of our stockholders. But as we have previously indicated, you must improve the value of your proposal if there is to be an agreed transaction. My counter proposal to you yesterday was a very reasonable basis on which to reach agreement. Your intransigence is not a reasonable response and your demand that we accept your offer in the next four hours, and threat to conduct a proxy contest to try to control both sides of this negotiation are entirely inappropriate.

Martin

On November 13, 2014, various media reports noted that Halliburton was in talks to acquire Baker Hughes. That afternoon beginning at 3:34 EST, the trading volume of both Halliburton’s and Baker Hughes’s shares increased significantly. Baker Hughes shares were subsequently halted in New York Stock Exchange trading due to volatility, re-opening at approximately 3:49 PM EST. Baker Hughes’s stock price closed at $58.75, an increase of approximately 15.2% from the prior day’s close, and Halliburton’s stock price closed at $53.79, an increase of approximately 1.1% to the prior day’s close.

That evening, following such market speculation and an article in The Wall Street Journal discussing such speculation, Baker Hughes issued the following press release:

Baker Hughes Confirms Preliminary Discussions with Halliburton

HOUSTON, Nov. 13, 2014 /PRNewswire/ -- Baker Hughes Incorporated (NYSE: BHI) today confirmed that it has engaged in preliminary discussions with Halliburton Company regarding a potential business combination transaction. These discussions may or may not lead to any transaction. Baker Hughes does not intend to comment further on market speculation or disclose any developments unless and until it otherwise deems further disclosure is appropriate or required.

On the morning of Friday, November 14, 2014, the Halliburton Board held a telephonic meeting to discuss the potential transaction. Also in attendance were members of Halliburton’s management and representatives of Baker Botts, Wachtell, Credit Suisse and BofA Merrill Lynch. Members of Halliburton management reviewed with the Halliburton Board the current status of the proposed transaction, including the tentative agreements that had been reached with respect to antitrust matters and termination fees. Management representatives also reviewed financial metrics relating to the transaction, including premiums and multiples implied by Halliburton’s initial offer and in the event Halliburton were to increase the stock component of its offer. Management representatives also reviewed the benefits of the transaction, including Halliburton’s estimates that anticipated cost synergies totaled nearly $2 billion. Representatives of Baker Botts reviewed the current status of the merger agreement negotiations as well as antitrust considerations relating to the transaction. Representatives of Credit Suisse and BofA Merrill Lynch each reviewed their respective preliminary financial analyses with respect to Halliburton, Baker Hughes and the proposed transaction.

After the Halliburton Board meeting, Mr. Voyles called Mr. Crain and told him that it appeared that the parties had reached an impasse, but that there might be a way to restart the discussions. Mr. Voyles told Mr. Crain that Halliburton was ready to submit its slate of nominees for election to the Baker Hughes Board, but suggested that he suspected both parties had some flexibility on price, and suggested that the two of them and Messrs. Lesar and Craighead meet to discuss price and come with full authority from the respective companies’ boards of directors to reach an agreement. Later that afternoon, Mr. Crain called Mr. Voyles to tell him that

 

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Baker Hughes was committed to exploring a negotiated transaction on the right terms and agreed that the parties should meet in person to discuss possible terms of a transaction. Mr. Crain asked Mr. Voyles to send a response to the comments Baker Hughes had sent earlier in the week regarding the employee benefits provisions of the merger agreement. Mr. Crain also told Mr. Voyles that Baker Hughes was not willing to meet if Halliburton delivered a notice nominating directors to replace the Baker Hughes Board before the meeting or at the meeting. Mr. Voyles responded that, because a meeting could not occur until late afternoon, Halliburton believed it necessary to submit the notice to protect Halliburton’s interests.

Later that afternoon, after the close of trading on the NYSE, representatives of Baker Botts delivered to Baker Hughes’s corporate secretary Halliburton’s notice of its intention to nominate a full slate of 13 independent candidates for election at Baker Hughes’s April 2015 annual meeting of stockholders. At the close of trading on November 14, Baker Hughes’s share price was $59.89 and Halliburton’s share price was $55.08.

Subsequently, Mr. Lesar sent Mr. Craighead the following email message:

Martin –

As I understand Robb and Alan discussed earlier, we continue to be committed to meeting with you to negotiate an agreement that is beneficial to both of our companies and our respective shareholders. I look at the delivery of the director nominations as just a legal matter which we were required to do to maintain our future options. It does not negate my personal desire and that of our Board to achieve a friendly transaction that you and your Board can feel good about. Robb and I are available to meet with Alan and you any time tonight or tomorrow to discuss and agree on the few remaining issues that need to be addressed. We should both commit to attend the meeting with flexibility on price and other remaining issues. I look forward to hearing back from you soon.

Dave

Following receipt of the message, Mr. Craighead and Mr. Crain had a call with Mr. Nichols to update him on delivery of the nominations and potential next steps. The evening of November 14, 2014, Baker Hughes issued the following press release, attaching copies of Mr. Craighead’s correspondence to Mr. Lesar referenced above of November 4, 9 and 12:

Baker Hughes Announces Receipt of Director Nominations from Halliburton

HOUSTON, Nov.14, 2014 /PRNewswire/ -- Baker Hughes Incorporated (NYSE: BHI) today announced receipt of notice from Halliburton Company that it intends to nominate candidates to replace the entire board of directors of Baker Hughes at its Apr. 2015 annual meeting.

The nominations followed discussions between the parties regarding a potential business combination transaction, and Halliburton’s refusal to improve its first and only value proposal. Baker Hughes considers the notice to be an attempt by Halliburton to pressure the Baker Hughes board into accepting a transaction with Halliburton on Halliburton’s terms.

The discussions began after Baker Hughes received an unsolicited proposal from Halliburton without prior notice on Oct. 13, 2014 to acquire all of the outstanding shares of the Company in a proposed transaction that Halliburton claimed would produce $2 billion in synergies after any required divestitures. The discussions continued over the following weeks and substantial progress was made in analyzing the substantial antitrust issues that would be involved in any such transaction, allocating antitrust risk between Halliburton and Baker Hughes, and negotiating merger documentation.

 

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After receiving the Company’s counter proposal on value, Halliburton refused to increase its first and only value proposal and, among other things, refused not to solicit the Company’s employees during the period before closing. Instead, Halliburton delivered the director nomination notice to the Company.

Martin Craighead, Chairman and CEO of Baker Hughes stated: “Baker Hughes is disappointed that Halliburton has chosen to seek to replace the entire Baker Hughes board rather than continue the private discussions between the parties. Baker Hughes believes that Halliburton’s various attempts at coercive tactics, instead of being willing to negotiate a reasonable value for the Company’s stock and despite having stated twice that they have room to increase the value of their offer, are attempts to control both sides of a negotiation and are entirely inappropriate.”

Consistent with its fiduciary duties, the Baker Hughes board, in consultation with its financial and legal advisors, has carefully reviewed and considered Halliburton’s initial proposal and unanimously determined that it is not at an adequate value level and therefore not in the best interests of the Company’s stockholders.

Accordingly, the Company’s stockholders are advised to not take any action at this time. Mr. Craighead sent the attached responses to Halliburton’s CEO during the negotiation process.

PDF: Attachment Response, November 4, 2014

PDF: Attachment Response, November 9, 2014

PDF: Attachment Response, November 12, 2014

Baker Hughes is evaluating the director nomination notice for compliance with its by-laws.

Goldman, Sachs & Co. is serving as financial advisor to the Company and Davis Polk & Wardwell LLP is serving as legal counsel to the Company.

Later that evening, Mr. Lesar sent a message to Mr. Craighead reiterating his message from earlier in the afternoon and inviting Mr. Craighead to meet.

On the morning of November 15, 2014, the Baker Hughes Board held a special meeting. At the invitation of the Baker Hughes Board, members of senior management and representatives of Goldman Sachs, Davis Polk, Wilmer Hale, Morris Nichols and Akin Gump also were present. A representative of Goldman Sachs discussed market trading following the leak of the discussions. The Baker Hughes Board then discussed how next to respond to Halliburton, and decided that Mr. Craighead would contact Mr. Lesar and suggest a willingness to meet to continue negotiations if Mr. Lesar were prepared to revise Halliburton’s initial proposal.

Shortly following the Baker Hughes Board meeting, Mr. Craighead sent the following message to Mr. Lesar:

Dave-

In response to your two messages last night, it is not possible to pretend that your effort to replace our entire board with your nominees is “just a legal matter.” It is coercive in every sense of the word.

We were willing to meet and continue negotiations in order to reach a mutually satisfactory conclusion. If you convey a reasonable response to our counterproposal we will respond.

Martin

 

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Mr. Lesar responded to Mr. Craighead that morning to suggest that they and Messrs. Voyles and Crain meet. Early that afternoon, Mr. Lesar and Mr. Voyles met with Mr. Craighead and Mr. Crain at Baker Hughes’s headquarters to discuss valuation in the context of a transaction. After extensive negotiations, Mr. Lesar told Mr. Craighead that his final and best offer was 1.12 shares of Halliburton common stock and $19.00 in cash for each share of Baker Hughes common stock, which represented a value of $75.91 per Baker Hughes share, based on Halliburton’s last unaffected intraday price on November 13, 2014, immediately prior to media reports that Halliburton was in talks to acquire Baker Hughes and a value of $78.62 per Baker Hughes share, based on Halliburton’s closing price on November 12, 2014. The offer represented a premium of 54.2% to the closing price of Baker Hughes common stock on November 12, 2014. Messrs. Lesar and Craighead agreed to recommend this merger consideration to their respective boards of directors.

On the afternoon of November 15, 2014, Davis Polk delivered a further revised draft of the merger agreement to Baker Botts and Wachtell, and representatives of Davis Polk, Norton Rose Fulbright (Baker Hughes’s employee benefits counsel), Baker Botts and Wachtell discussed outstanding issues, including the scope of interim operating covenants restricting Baker Hughes’s operations prior to the closing, the terms upon which the Baker Hughes Board could consider an alternative acquisition and employee matters. During the remainder of that day and the following day, the parties and their respective counsel continued to finalize the terms of the merger agreement.

On the morning of Sunday, November 16, 2014, following an oral agreement to maintain the confidentiality of the matters to be discussed, Mr. Crain and Mr. Voyles had a call to discuss certain non-public legal information concerning the companies’ businesses.

On the afternoon of Sunday, November 16, 2014, the Halliburton Board met to consider approval of the merger agreement. Prior to the meeting, copies of the draft merger agreement, a summary of the terms of the merger agreement, proposed board resolutions, drafts of the written opinions of Credit Suisse and BofA Merrill Lynch and a presentation prepared by Baker Botts were made available to the directors. Representatives of Baker Botts and Wachtell reviewed with the directors their duties with respect to the transaction and the terms of the merger agreement, including the merger consideration, regulatory covenants, key closing conditions, termination rights and associated termination fees, as well as the outstanding issues on the merger agreement. Mr. Voyles also discussed the legal due diligence call he had earlier that day with Mr. Crain. Representatives of Credit Suisse then reviewed and discussed its financial analyses with respect to Halliburton, Baker Hughes and the proposed merger. Thereafter, at the request of the Halliburton Board, Credit Suisse rendered its oral opinion to the Halliburton Board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion addressed to the Halliburton Board dated as of the same date) as to, as of November 16, 2014, the fairness, from a financial point of view, to Halliburton of the consideration to be paid by Halliburton in the merger pursuant to the merger agreement. Representatives of BofA Merrill Lynch then reviewed and discussed its financial analyses with respect to Halliburton, Baker Hughes and the proposed merger. Thereafter, BofA Merrill Lynch delivered to the Halliburton Board an oral opinion, which was confirmed by delivery of a written opinion dated November 16, 2014, to the effect that, as of that date and based on and subject to various assumptions and limitations described in its opinion, the consideration to be paid in the merger by Halliburton pursuant to the merger agreement was fair, from a financial point of view, to Halliburton.

The Halliburton Board then unanimously approved the merger agreement, directed that the proposal to approve the issuance of Halliburton common stock in the merger be submitted to Halliburton stockholders for approval, and resolved to recommend that the stockholders approve such proposal. The Halliburton Board also authorized Halliburton management to finalize, execute and deliver the merger agreement, and to enter into the financing commitments and take other actions with respect to the transaction.

Also during the afternoon of Sunday, November 16, 2014, the Baker Hughes Board held a special meeting to review the terms of the proposed transaction with Halliburton. At the invitation of the Baker Hughes Board, members of senior management and representatives of Goldman Sachs, Davis Polk, Wilmer Hale, Akin Gump,

 

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Morris Nichols, and Norton Rose Fulbright also were present. Prior to the meeting, copies of the draft merger agreement, a summary of the terms of the merger agreement, proposed board resolutions and presentations prepared by each of Goldman Sachs and Davis Polk were made available to the directors. Mr. Craighead updated the Baker Hughes Board on the course and status of negotiations. Representatives of Goldman Sachs reviewed with the Baker Hughes Board its financial analysis of the proposed merger consideration, and delivered an oral opinion, subsequently confirmed by delivery of a written opinion, dated November 16, 2014, that, as of such date and based on and subject to the factors and assumptions set forth in that opinion, the merger consideration to be paid to the holders of Baker Hughes common stock (other than Halliburton and its affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders. Also during the meeting, the Baker Hughes Board considered whether it would be advisable to engage a second investment bank to provide a second fairness opinion, but determined after discussion that it was not necessary to do so.

The Baker Hughes Board understood that while there had been inquiries in the market about the transaction with Halliburton following the November 13, 2014 leak, neither Goldman Sachs nor Baker Hughes had received any proposals for, or requests for meetings to discuss, any transactions involving Baker Hughes and third parties. The Baker Hughes Board and its advisors discussed and considered whether other potential buyers should be contacted prior to signing the merger agreement. The Baker Hughes Board’s view, based on advice received, was that the level of interest from third parties was not likely to be significant at a valuation in excess of that implied by the potential transaction with Halliburton. The Baker Hughes Board and its advisors also discussed their view that the terms of the merger agreement under consideration were consistent with market practice and would not preclude or impede a willing and financially capable third party, were one to exist, from making a superior proposal following the announcement of a transaction with Halliburton. The Baker Hughes Board and its advisors also discussed the fact that any delay resulting from an effort to contact third parties could jeopardize Halliburton’s willingness to proceed with a transaction that, as structured, the Baker Hughes Board believed was in the best interests of its stockholders.

Mr. Crain as well as representatives from Davis Polk reviewed with the Baker Hughes Board the proposed material terms of the transaction, including the antitrust efforts covenant, the termination fee and reverse termination fees that had been negotiated, and the treatment of equity awards in the transaction. Mr. Crain also discussed the legal due diligence call he had earlier that day with Mr. Voyles. Representatives of Davis Polk then reviewed with the Baker Hughes Board its fiduciary duties in considering the transaction.

Following questions from and discussions among the directors and with their advisors regarding the proposed transaction, the directors unanimously determined it was advisable and in the best interests of Baker Hughes and its stockholders to enter into the merger agreement, substantially in the form presented, and to consummate the merger and the other transactions contemplated thereby, and the directors unanimously approved and adopted the merger agreement, the merger and the other transactions contemplated thereby, directed that the merger agreement be submitted to stockholders of Baker Hughes for consideration and resolved to recommend that stockholders of Baker Hughes approve and adopt the merger agreement and the merger.

Following the Halliburton and Baker Hughes Board meetings, representatives of Halliburton, Baker Hughes, Davis Polk, Norton Rose Fulbright, Baker Botts and Wachtell participated in calls relating to the merger agreement and other related documents. The merger agreement was executed and delivered, as of November 16, 2014, by Halliburton and Baker Hughes concurrently with the delivery by Halliburton of a letter irrevocably withdrawing its notice of nomination of candidates for election to the Baker Hughes Board. In addition, in connection with the transactions contemplated by the merger agreement, Halliburton obtained a commitment letter, dated as of November 16, 2014, from Bank of America, N.A., BofA Merrill Lynch, Credit Suisse AG and Credit Suisse, pursuant to which, subject to certain conditions and limitations, the commitment parties thereunder agreed to provide senior unsecured bridge loans in an aggregate principal amount of up to $8.6 billion pursuant to a new senior unsecured bridge facility to fund a portion of the cash consideration for the transactions and to pay the fees and expenses incurred in connection therewith.

 

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Early in the morning on November 17, 2014, and prior to the commencement of trading on the New York Stock Exchange, Halliburton and Baker Hughes issued a joint press release announcing the transaction. Halliburton and Baker Hughes each publicly filed this press release on November 17, 2014, with the SEC.

Recommendation of the Halliburton Board and its Reasons for the Merger

The Halliburton Board reviewed and considered the terms of the merger and the merger agreement and unanimously determined that the merger, including the issuance of shares of Halliburton common stock, as contemplated by the merger agreement, is fair to and in the best interests of Halliburton and its stockholders. The Halliburton Board unanimously recommends that Halliburton stockholders vote FOR the proposal to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement.

In reaching its decision to recommend that the Halliburton stockholders approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement, the Halliburton Board consulted with Halliburton management, as well as Credit Suisse and BofA Merrill Lynch, Halliburton’s financial advisors in connection with the merger, and Baker Botts and Wachtell, outside counsel to Halliburton in connection with the merger, and considered various other factors, both positive and negative. The following discussion of the information and factors considered by the Halliburton Board is not intended to be exhaustive and may not include all of the factors considered by the Halliburton Board. In view of the wide variety of factors considered by the Halliburton Board in connection with its evaluation of the merger, the Halliburton Board did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. In considering the factors described below, individual members of the Halliburton Board may have given different weight to different factors. The Halliburton Board considered this information as a whole and considered overall the information and factors to be favorable to, and in support of, its determinations and recommendations. The material information and factors considered by the Halliburton Board were the following:

Strategic Considerations. The Halliburton Board considered a number of factors pertaining to the strategic rationale for the merger, including the following:

 

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Baker Hughes’s high quality asset base;

 

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Baker Hughes’s product lines, which will complement and diversify Halliburton’s product lines, particularly in the areas of specialty chemicals, artificial lift and rotary steerables;

 

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The combined company being well-positioned for continued superior growth, margins and returns;

 

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Expectations that the transaction will combine the companies’ product and service capabilities to deliver an unsurpassed depth and breadth of solutions to customers;

 

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Estimated available cost synergies of nearly $2 billion annually upon full integration of the businesses; and

 

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Expectations that the merger will be accretive to cash flow of the combined company by the end of the first calendar year after closing and earnings per share by the end of the second calendar year after closing.

Impact of the Merger on Customers, Employees and Suppliers. The Halliburton Board evaluated the expected impact of the merger on Halliburton’s customers, employees and suppliers and the benefits that are expected to be derived from the merger, including increased operating efficiencies and reduced costs, which could allow the combined company to be the most efficient and lowest cost service provider in the businesses in which it will operate. The Halliburton Board considered that the combined organization would be able to utilize the available talent of both companies’ employees and will have additional scale and resources to offer greater opportunities to continuing employees.

 

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Share Prices. The Halliburton Board considered the historical stock prices of Halliburton and Baker Hughes, including the average price for Halliburton and Baker Hughes common stock for periods from one day to thirty days prior to November 12, 2014, based on which the merger consideration represented a premium in the range of approximately 48% to 54%.

Recommendation of Management. The Halliburton Board took into account Halliburton’s management’s recommendation in favor of the merger.

Opinions of Financial Advisors. The Halliburton Board considered the respective financial analyses of each of Credit Suisse and BofA Merrill Lynch, as reviewed and discussed with the Halliburton Board, as well as the opinion of Credit Suisse to the effect that, as of November 16, 2014, and based upon and subject to the assumptions, qualifications, limitations and other matters considered in connection with the preparation of its opinion, the merger consideration to be paid by Halliburton in the merger pursuant to the merger agreement was fair, from a financial point of view, to Halliburton, and the opinion of BofA Merrill Lynch to the effect that, as of November 16, 2014 and based on and subject to various assumptions and limitations described in its opinion, the merger consideration to be paid in the merger by Halliburton was fair, from a financial point of view, to Halliburton.

Strategic Alternatives. The Halliburton Board considered the trends and competitive developments in the industry and the range of strategic alternatives available to Halliburton.

Terms of the Merger Agreement. The Halliburton Board reviewed and considered the terms of the merger agreement, including that the exchange ratio will be a fixed number of shares of Halliburton common stock, the restrictions on each party’s operations between the signing of the merger agreement and the closing of the merger, the representations and warranties of each party, the conditions to each party’s obligation to complete the merger, the rights of each party to consider and engage in negotiations regarding potentially superior proposals, the rights of each party to withdraw or otherwise change its recommendation to its stockholders in favor of the proposals related to the merger agreement, the rights of each party to terminate the merger agreement and the obligations of each party to pay a termination fee or reimburse the other party for expenses. See “The Merger Agreement” beginning on page 127 for a detailed discussion of the terms and conditions of the merger agreement.

Post-Merger Corporate Governance. The Halliburton Board considered the corporate governance provisions of the merger agreement, that Mr. Lesar will serve as Chairman and Chief Executive Officer of the combined company and that the Halliburton Board would be expanded to include three mutually selected directors from the Baker Hughes Board. See “Post-Merger Governance and Management” beginning on page 151 for further information.

Tax Considerations. The Halliburton Board considered that the merger is expected to qualify as a reorganization for U.S. federal income tax purposes and, as a result, the exchange by Baker Hughes stockholders of their shares of Baker Hughes common stock for shares of Halliburton common stock (but not cash merger consideration) in the merger generally will be tax-free to Baker Hughes stockholders.

Regulatory Approvals. The Halliburton Board considered the likelihood that the merger will be completed on a timely basis, including the likelihood that the merger will receive all necessary regulatory approvals (and the conditions to which such approvals might be subject) and the likelihood that all conditions to consummation of the merger will be satisfied, including, among other conditions, that Halliburton is not required (although it could so choose) to divest or hold separate, or agree to any conduct remedy or similar antitrust action regarding, any assets, businesses or product lines if such assets, businesses or product lines accounted for, in the aggregate, more than the detriment limit. To that end, the Halliburton Board further considered the potential length of the regulatory approval process and that the merger agreement provides that, subject to certain exceptions, it may not be terminated until October 30, 2015, which may be extended to April 30, 2016 under specified circumstances to obtain required antitrust clearances.

 

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The Halliburton Board also considered potential risks associated with the merger, including the following:

Business Risks. The Halliburton Board considered certain risks associated with Baker Hughes’s business and operations, including the potential impact of changes in crude oil prices, as well as other risks of the type and nature described under “Risk Factors.”

Merger Consideration. The Halliburton Board considered that the exchange ratio that determines a portion of the merger consideration is fixed, and the merger consideration will not adjust downwards to compensate Halliburton for any decline in the price of Baker Hughes common stock or increase in the price of Halliburton common stock prior to the closing of the merger. Please read “Risk Factors—Risks Relating to the Merger—The exchange ratio is fixed and will not be adjusted in the event of any change in either Baker Hughes’s or Halliburton’s stock price. As a result, Baker Hughes stockholders cannot be sure at the time they vote on the merger of the value of the merger consideration they will receive or the value of the Baker Hughes stock they will give up.” The Halliburton Board determined that this structure was appropriate and the risk acceptable in view of the relative intrinsic values and financial performance of Baker Hughes and Halliburton, the percentage of the combined company to be owned by current Halliburton stockholders and the inclusion of other structural protections in the merger agreement, such as Halliburton’s ability to terminate the merger agreement if Baker Hughes experiences certain material adverse effects on its business.

Antitrust Risk; Antitrust Termination Fee. The Halliburton Board considered the risk that the Antitrust Division of the DOJ, the FTC, the European Commission or antitrust authorities of any other jurisdiction could take such action under the antitrust laws as they deem necessary or desirable in the public interest, including seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Halliburton or Baker Hughes, for which there may not be a sufficient number of willing buyers at satisfactory prices and which may have the effect of significantly lowering the estimated value of the combined company after the merger. In addition, the Halliburton Board considered the risk that at any time before or after the completion of the merger, and notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. The Halliburton Board considered the risk that Halliburton could be required, under certain circumstances where the termination of the merger agreement is related to failures to obtain required Regulatory Clearances, to pay Baker Hughes a termination fee of $3.5 billion. See “The Merger Agreement—Additional Agreements—Reasonable Best Efforts Related to Consents and Approvals of Governmental Entities and Third Parties” beginning on page 141 for further information regarding antitrust risk and “The Merger Agreement—Termination of the Merger Agreement and Termination Fees” beginning on page 147 for further information regarding such termination fee.

Termination Fees; Alternative Proposals. The Halliburton Board considered the risk that, although Halliburton has the right under certain limited circumstances to consider and participate in negotiations with respect to proposals for alternative transactions, the merger agreement contains provisions relating to the potential payment of a termination fee of $1.5 billion in connection with an alternative transaction, which may have the effect of discouraging such proposals. In addition, the Halliburton Board considered that the merger agreement includes other customary restrictions on the ability of Halliburton to solicit offers for alternative proposals or engage in discussions regarding such proposals, subject to exceptions, which could have the effect of discouraging such proposals from being made or pursued, even if potentially more favorable to the stockholders of Halliburton than the merger. The Halliburton Board also considered that Halliburton is required to pay a termination fee of $1.5 billion if Halliburton stockholders fail to approve the issuance of shares of Halliburton common stock as contemplated by the merger agreement, or, as described above, $3.5 billion in certain circumstances where the termination of the merger agreement is related to failures to obtain required Regulatory Clearances. See “The Merger Agreement—Termination of the Merger Agreement and Termination Fees” beginning on page 147 for further information regarding such fees.

Due Diligence. The Halliburton Board considered and evaluated the results of the due diligence investigation undertaken by Halliburton’s management with the assistance of its legal and financial advisors. The Halliburton

 

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Board considered that the scope of due diligence was limited to a review and analysis of publicly available information relating to Baker Hughes, except with respect to information shared during a telephone conversation between Mr. Crain and Mr. Voyles. The Halliburton Board also considered the scope of the representations and warranties in the merger agreement in light of the matters raised in the course of the due diligence.

Debt Financing. The Halliburton Board considered the financing alternatives to fund the cash portion of the merger consideration, including the potential terms of a bridge facility to be entered into pursuant to the commitment letter entered with BofA Merrill Lynch. The Board considered management’s view that the terms of the proposed bridge facility were competitive in the then-current market for such facilities.

Diversion of Management. The Halliburton Board considered the possible diversion of management’s time and attention from Halliburton’s ongoing business due to the substantial time and effort necessary to complete the merger and plan for and implement the integration of the operations of Halliburton and Baker Hughes. See “Risk Factors” beginning on page 32 for further information.

Transaction Costs and Integration. The Halliburton Board took into account the substantial transaction and integration costs to be incurred in connection with the merger and the possibility that the potential benefits of the merger, including the estimated cost synergies, will not be realized or will not be realized within the expected time period, and the risks and challenges associated with the integration of Halliburton’s and Baker Hughes’s businesses, operations and workforces.

After consideration of these material factors, the Halliburton Board concluded that the risks associated with the transaction could be (i) mitigated or managed by Halliburton or, following the merger, by the combined company, (ii) were reasonably acceptable under the circumstances, and (iii) in light of the anticipated benefits overall, were significantly outweighed by the potential benefits of the merger.

The Halliburton Board realized that there can be no assurance about future results, including results considered or expected as described in the factors listed above, such as assumptions regarding the potential benefits of the merger. It should be noted that this explanation of the Halliburton Board’s reasoning and all other information presented in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 41.

Opinions of Halliburton’s Financial Advisors

Opinion of Credit Suisse Securities (USA) LLC

On November 16, 2014, Credit Suisse rendered its oral opinion to the Halliburton Board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion addressed to the Halliburton Board dated the same date) to the effect that, as of November 16, 2014, and subject to the assumptions, limitations, qualifications and other matters considered in connection with the preparation of its opinion, the merger consideration to be paid by Halliburton in the merger pursuant to the merger agreement was fair, from a financial point of view, to Halliburton.

Credit Suisse’s opinion was directed to the Halliburton Board (in its capacity as such), and only addressed the fairness, from a financial point of view, to Halliburton of the merger consideration to be paid by Halliburton in the merger pursuant to the merger agreement and did not address any other aspect or implication (financial or otherwise) of the merger. The summary of Credit Suisse’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex C to this joint proxy statement/prospectus and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in preparing its opinion. However, neither Credit Suisse’s written opinion nor

 

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the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and they do not constitute, advice or a recommendation to any holder of Halliburton common stock as to how such holder should vote or act on any matter relating to the merger.

In arriving at its opinion, Credit Suisse:

 

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reviewed the merger agreement and certain publicly available business and financial information relating to Baker Hughes and Halliburton;

 

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reviewed certain other information relating to Baker Hughes and Halliburton, including financial forecasts relating to Baker Hughes for the fiscal years ending December 31, 2014 through December 31, 2019 prepared by and provided to Credit Suisse by the management of Halliburton (which we refer to as the “Halliburton Projections for Baker Hughes”) and financial forecasts relating to Halliburton for the fiscal years ending December 31, 2014 through December 31, 2019 prepared by and provided to Credit Suisse by the management of Halliburton (which we refer to as the “Halliburton Projections”);

 

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reviewed certain estimates provided to Credit Suisse by the management of Halliburton with respect to the cost savings and synergies anticipated by Halliburton’s management to result from the merger (which we refer to as the “Halliburton Estimated Synergies”);

 

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spoke with the management of Halliburton regarding the business and prospects of Baker Hughes and Halliburton;

 

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considered certain financial and stock market data of Baker Hughes and Halliburton, and compared that data with similar data for other companies with publicly traded equity securities in businesses Credit Suisse deemed similar to those of Baker Hughes and Halliburton, respectively;

 

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considered, to the extent publicly available, the financial terms of certain other business combinations and other transactions which had been effected or announced; and

 

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considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which Credit Suisse deemed relevant.

As Halliburton was aware, Credit Suisse was not provided with the opportunity to meet with Baker Hughes management to discuss the business, operations, financial condition or prospects of Baker Hughes nor was Credit Suisse provided with any financial forecasts relating to the future financial performance of Baker Hughes prepared by Baker Hughes management.

In connection with its review Credit Suisse did not independently verify any of the foregoing information, and Credit Suisse assumed and relied upon such information being complete and accurate in all respects. With respect to the Halliburton Projections for Baker Hughes that Credit Suisse used and relied upon for purposes of its analyses and opinion, management of Halliburton advised Credit Suisse, and Credit Suisse assumed, that such financial forecasts were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Halliburton as to the future financial performance of Baker Hughes. With respect to the Halliburton Projections that Credit Suisse used and relied upon for purposes of its analyses and opinion, management of Halliburton advised Credit Suisse, and Credit Suisse assumed, that such financial forecasts were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Halliburton as to the future financial performance of Halliburton. With respect to the Halliburton Estimated Synergies anticipated by management of Halliburton to result from the merger, Credit Suisse was advised by the management of Halliburton, and Credit Suisse assumed, that such forecasts were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the management of Halliburton as to such cost savings and synergies. Credit Suisse expressed no view or opinion with respect to the Halliburton Projections for Baker Hughes, the Halliburton Projections, the Halliburton Estimated Synergies or the assumptions upon which they were based and, at the direction of management of Halliburton, Credit Suisse assumed that the Halliburton Estimated Synergies would be realized in

 

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the amounts and the times indicated thereby. At the direction of management of Halliburton, Credit Suisse further assumed that the Halliburton Projections for Baker Hughes, the Halliburton Projections and the Halliburton Estimated Synergies were a reasonable basis on which to evaluate Baker Hughes, Halliburton and the merger and Credit Suisse used and relied upon such information for purposes of its analyses and opinion.

In addition, Credit Suisse relied upon, without independent verification, the assessments of the management of Halliburton with respect to Halliburton’s ability to integrate the businesses of Baker Hughes and Halliburton. Halliburton advised Credit Suisse and for purposes of its analyses and opinion Credit Suisse assumed that, for U.S. federal income tax purposes, the merger would qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code. Credit Suisse also assumed, with Halliburton’s consent, that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Baker Hughes, Halliburton or the contemplated benefits of the merger that would be material to Credit Suisse’s analyses or opinion and, in particular, at the direction of management of Halliburton, Credit Suisse assumed that any divestitures of any businesses or assets of Baker Hughes or Halliburton or any limitations, restrictions or conditions on the future business or operations of Baker Hughes or Halliburton required to obtain the approval of any antitrust or other regulatory authority for the merger would not have an adverse effect on Baker Hughes, Halliburton or the contemplated benefits of the merger or otherwise that would be material to its analyses or opinion. With Halliburton’s consent Credit Suisse also assumed that the merger would be consummated in compliance with all applicable laws and regulations and in accordance with the terms of the merger agreement, without waiver, modification or amendment of any term, condition or agreement thereof material to Credit Suisse’s analyses or opinion. In addition, Credit Suisse was not requested to and did not make an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Baker Hughes or Halliburton, nor was Credit Suisse furnished with any such evaluations or appraisals.

Credit Suisse’s opinion addressed only the fairness, from a financial point of view, to Halliburton of the merger consideration to be paid by Halliburton in the merger pursuant to the merger agreement and did not address any other aspect or implication (financial or otherwise) of the merger or any agreement, arrangement or understanding entered into in connection therewith or otherwise, including, without limitation, the form and structure of the merger and the merger consideration, the financing of the merger consideration and the termination rights and related termination fee and expense payment obligations of Baker Hughes and Halliburton pursuant to the merger agreement, or the fairness of the amount or nature of, or any other aspect relating to, any compensation or consideration to be received or otherwise payable to any officers, directors, employees, securityholders or affiliates of any party to the merger, or class of such persons, relative to the merger consideration, the stock or cash components thereof or otherwise. Furthermore, Credit Suisse did not express any advice or opinion regarding matters that require legal, regulatory, accounting, insurance, tax, environmental, executive compensation or other similar professional advice. Credit Suisse assumed that Halliburton had or would obtain such advice or opinions from the appropriate professional sources. The issuance of Credit Suisse’s opinion was approved by its authorized internal committee.

Credit Suisse’s opinion was necessarily based upon information made available to Credit Suisse as of the date of the opinion and financial, economic, market and other conditions as they existed and could be evaluated on the date of the opinion. Credit Suisse did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion. In addition, as Halliburton was aware, the financial projections and estimates that Credit Suisse reviewed relating to the future financial performance of Baker Hughes and Halliburton reflected certain assumptions regarding the oil and gas industry that were subject to significant uncertainty and volatility and that, if different than assumed, could have a material impact on its analyses and opinion. In addition, as Halliburton was aware, the credit, financial and stock markets had been experiencing significant volatility and Credit Suisse expressed no opinion or view as to any potential effects of such volatility on Baker Hughes, Halliburton or the merger. Credit Suisse’s opinion did not address the relative merits of the merger as compared to alternative transactions or strategies that might have been available to Halliburton, nor did it address the underlying business

 

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decision of the Halliburton Board or Halliburton to proceed with or effect the merger. Credit Suisse did not express any opinion as to what the value of shares of Halliburton common stock actually would be when issued pursuant to the merger or the price or range of prices at which shares of Halliburton common stock or Baker Hughes common stock could be purchased or sold at any time.

In preparing its opinion to the Halliburton Board, Credit Suisse performed a variety of analyses, including those described below. The summary of Credit Suisse’s financial analyses is not a complete description of the analyses underlying Credit Suisse’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaptation and application of those methods to the unique facts and circumstances presented. As a consequence, neither Credit Suisse’s opinion nor the analyses underlying its opinion are readily susceptible to partial analysis or summary description. Credit Suisse arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, analytic method or factor. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

In performing its analyses, Credit Suisse considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company, business or transaction used in Credit Suisse’s analyses for comparative purposes is identical to Halliburton, Baker Hughes or the proposed merger. Accordingly, an evaluation of the results of any analysis is not entirely mathematical. While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, Credit Suisse did not make separate or quantifiable judgments regarding individual analyses. The reference ranges indicated by Credit Suisse’s financial analyses are illustrative and not necessarily indicative of actual values nor predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond Halliburton’s control and the control of Credit Suisse. Much of the information used in, and accordingly the results of, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

Credit Suisse’s opinion and analyses were provided to the Halliburton Board (in its capacity as such) in connection with its consideration of the proposed merger and were among many factors considered by the Halliburton Board in evaluating the proposed merger. Neither Credit Suisse’s opinion nor its analyses were determinative of the merger consideration or of the views of the Halliburton Board with respect to the proposed merger. Under the terms of its engagement by Halliburton, neither Credit Suisse’s opinion nor any other advice or services rendered by it in connection with the proposed merger or otherwise, should be construed as creating, and Credit Suisse should not be deemed to have, any fiduciary duty to the Halliburton Board, Halliburton, Baker Hughes, any security holder or creditor of Halliburton or Baker Hughes or any other person, regardless of any prior or ongoing advice or relationships.

The following is a summary of certain financial analyses reviewed by Credit Suisse with the Halliburton Board in connection with the rendering of its opinion to the Halliburton Board on November 16, 2014. The summary does not contain all of the financial data holders of Halliburton common stock may want or need for purposes of making an independent determination of fair value. Holders of Halliburton common stock are encouraged to consult their own financial and other advisors before making any investment decision in connection with the proposed merger. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis could create a misleading or incomplete view of Credit Suisse’s analyses.

 

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For purposes of its analyses, Credit Suisse reviewed a number of financial metrics including:

 

•

Enterprise value—generally the value as of a specified date of the relevant company’s outstanding equity securities (taking into account its options and other outstanding convertible securities) plus the value as of such date of its net debt (the value of its outstanding indebtedness, preferred stock, non-controlling interests and capital lease obligations less the amount of cash and equivalents on its balance sheet).

 

•

EBITDA—generally the amount of the relevant company’s earnings before interest, taxes, depreciation and amortization for a specified time period.

 

•

After-tax cash flow—generally the amount of the relevant company’s net income plus depreciation and amortization for a specified time period.

Unless otherwise indicated, (1) the relevant values for the selected transactions analysis described below were calculated on an enterprise value basis based on the consideration proposed to be paid in the selected transactions as of the date of announcement, (2) estimates of future financial performance of Baker Hughes were based on the Halliburton Projections for Baker Hughes, and (3) estimates of future financial performance of Halliburton were based on the Halliburton Projections. Estimates of financial performance for the selected companies listed below for the calendar years ending December 31, 2014, 2015 and 2016 were based on publicly available research analyst consensus estimates for those companies.

Based on the merger consideration per share of Baker Hughes common stock of 1.12 shares of Halliburton common stock and $19.00 in cash, Credit Suisse calculated the following implied values of the merger consideration per share of Baker Hughes common stock:

 

•

$78.62, by adding $19.00 to the product of 1.12 and $53.23, the closing price per share of Halliburton common stock on November 12, 2014, the last trading day prior to market rumors regarding a possible business combination between Halliburton and Baker Hughes; and

 

•

$80.69, by adding $19.00 to the product of 1.12 and $55.08, the closing price per share of Halliburton common stock on November 14, 2014, the last trading day prior to the day the execution of the merger agreement was publicly announced.

Financial Analyses with Respect to Baker Hughes

Selected Companies Analysis

Credit Suisse considered certain financial data for Baker Hughes and selected companies with publicly traded equity securities Credit Suisse deemed relevant. The selected companies were selected because they were deemed to be similar to Baker Hughes in one or more respects.

The financial data reviewed included:

 

•

Enterprise Value as a multiple of estimated EBITDA for the year ended December 31, 2014, or “2014E EBITDA”;

 

•

Enterprise Value as a multiple of estimated EBITDA for the year ended December 31, 2015, or “2015E EBITDA”;

 

•

Enterprise Value as a multiple of estimated EBITDA for the year ended December 31, 2016, or “2016E EBITDA”;

 

•

Price as a multiple of estimated cash flow per share for the year ended December 31, 2014, or “2014E CFPS”;

 

•

Price as a multiple of estimated cash flow per share for the year ended December 31, 2015, or “2015E CFPS”;

 

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•

Price as a multiple of estimated cash flow per share for the year ended December 31, 2016, or “2016E CFPS”;

 

•

Market value as a multiple of estimated net income for the year ended December 31, 2014, or “2014E Net Income”;

 

•

Market value as a multiple of estimated net income for the year ended December 31, 2015, or “2015E Net Income”; and

 

•

Market value as a multiple of estimated net income for the year ended December 31, 2016, or “2016E Net Income.”

The selected companies and corresponding financial data as of November 12, 2014 were:

 

Enterprise Value(1)/ EBITDA(2)

Price(1)/ CFPS(2)

Market Value(1)/ Net Income(2)

2014E

2015E

2016E

2014E

2015E

2016E

2014E

2015E

2016E

Schlumberger Limited

9.6x

8.8x

8.1x

12.0x

10.5x

9.4x

17.2x

15.4x

13.9x

Halliburton Company

7.2x

6.3x

5.6x

8.8x

7.2x

6.4x

13.5x

11.4x

9.9x

Baker Hughes Incorporated

5.5x

4.8x

4.4x

7.2x

5.5x

5.3x

12.7x

10.5x

9.2x

Weatherford International Ltd.

6.6x

5.8x

5.3x

7.3x

4.8x

4.4x

14.6x

10.1x

8.3x

 

(1)	Based on the closing price per share of the relevant company’s common stock on November 12, 2014, the last trading day prior to market rumors regarding a possible business combination between Halliburton and Baker Hughes.

(2)	Based on publicly available research analyst consensus estimates.

The selected companies and corresponding financial data as of November 14, 2014 were:

 

Enterprise Value(1)/ EBITDA(2)

Price(1)/ CFPS(2)

Market Value(1)/ Net Income(2)

2014E

2015E

2016E

2014E

2015E

2016E

2014E

2015E

2016E

Schlumberger Limited

9.4x

8.6x

7.9x

11.7x

10.3x

9.2x

16.9x

15.1x

13.6x

Halliburton Company

7.4x

6.5x

5.8x

9.2x

7.5x

6.7x

13.9x

11.8x

10.3x

Baker Hughes Incorporated

6.3x

5.6x

5.1x

8.5x

6.4x

6.2x

15.0x

12.4x

10.8x

Weatherford International Ltd.

6.9x

6.1x

5.5x

7.9x

5.1x

4.7x

15.7x

10.8x

8.9x

 

(1)	Based on the closing price per share of the relevant company’s common stock on November 14, 2014, the last trading day prior to the day the execution of the merger agreement was publicly announced.

(2)	Based on publicly available research analyst consensus estimates.

Using the Halliburton Projections for Baker Hughes, and taking into account the results of the selected companies analysis, Credit Suisse applied multiple ranges of 5.50x to 6.50x to Baker Hughes’s 2014E EBITDA, 4.75x to 6.00x to Baker Hughes’s 2015E EBITDA, 4.25x to 5.50x to Baker Hughes’s 2016E EBITDA, 7.00x to 8.00x to Baker Hughes’s 2014E after-tax cash flow, 5.50x to 6.50x to Baker Hughes’s 2015E after-tax cash flow, 5.25x to 6.25x to Baker Hughes’s 2016E after-tax cash flow, 12.75x to 14.50x to Baker Hughes’s 2014E net income, 10.50x to 11.50x to Baker Hughes’s 2015E net income, and 9.00x to 10.00x to Baker Hughes’s 2016E net income. The selected companies analysis, which did not reflect the projected Halliburton Estimated Synergies, indicated an implied reference range of $49.62 to $65.29 per share of Baker Hughes common stock, as compared to the implied values of the merger consideration of $78.62 per share of Baker Hughes common stock based on the closing price per share of Halliburton common stock on November 12, 2014 and $80.69 per share of Baker Hughes common stock, based on the closing price per share of Halliburton common stock on November 14, 2014, respectively.

 

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Discounted Cash Flow Analysis

Credit Suisse performed a discounted cash flow analysis of Baker Hughes by calculating the estimated net present value of the projected after-tax, unlevered, free cash flow of Baker Hughes for the period from September 30, 2014 through December 31, 2019 based on the Halliburton Projections for Baker Hughes. Credit Suisse applied a range of terminal value multiples of 6.0x to 8.0x to Baker Hughes’s estimated 2019E EBITDA. The estimated net present value of the projected future cash flow and terminal values were then calculated using discount rates ranging from 8.5% to 10.5%.

Credit Suisse also calculated the estimated net present value of the cost savings and synergies anticipated by Halliburton management to result from the merger based on the projected Halliburton Estimated Synergies provided by Halliburton management. Credit Suisse applied a range of terminal value multiples of 6.25x to 8.25x to estimated 2019E pre-tax Halliburton Estimated Synergies. The estimated net present value of the projected Halliburton Estimated Synergies and terminal values were then calculated using discount rates ranging from 8.5% to 10.5%. The analysis indicated an implied reference range of the Halliburton Estimated Synergies per share of Baker Hughes common stock of $20.57 to $27.71.

The discounted cash flow analysis for Baker Hughes indicated an implied reference range per share of Baker Hughes common stock of $67.12 to $93.68 excluding synergies and $87.69 to $121.38 including synergies, as compared to the implied values of the merger consideration of $78.62 per share of Baker Hughes common stock based on the closing price per share of Halliburton common stock on November 12, 2014 and $80.69 per share of Baker Hughes common stock, based on the closing price per share of Halliburton common stock on November 14, 2014, respectively.

Selected Transactions Analysis

Credit Suisse also considered the financial terms of certain business combinations and other transactions that Credit Suisse deemed relevant. The selected transactions were selected because the target companies or assets were deemed to be similar to Baker Hughes in one or more respects. The financial data reviewed included the implied Enterprise Value (the consideration proposed to be paid in the selected transactions as of the date of announcement) as a multiple of EBITDA for the last twelve months, or “LTM EBITDA.”

The selected transactions and corresponding financial data were:

 

Date Announced		Acquiror		Target		Enterprise Value/ LTM EBITDA
Large Cap
02/10		Schlumberger Limited		Smith International Inc.			14.4x
08/09		Baker Hughes Incorporated		BJ Services Company, LLC			6.6x
12/07		National Oilwell Varco, Inc.		Grant Prideco, Inc.			10.6x
05/98		Baker Hughes Incorporated		Western Atlas Inc.			9.9x
02/98		Halliburton Company		Dresser Industries, Inc.			9.5x
Equipment
09/14		Siemens AG		Dresser-Rand Group Inc.			18.3x
04/13		General Electric Company		Lufkin Industries, Inc.			17.4x
08/12		National Oilwell Varco, Inc.		Robbins & Myers, Inc.			9.4x
02/11		General Electric Company		John Wood Group PLC			16.9x
12/10		General Electric Company		Wellstream Holdings PLC			17.5x
10/10		General Electric Company		Dresser Inc.			NA
02/07		Tenaris SA		Hydril Company			13.6x
08/04		National-Oilwell Inc.		Varco International Inc.			13.6x
06/98		Schlumberger Limited		Camco International Inc.			14.0x

 

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Date Announced		Acquiror		Target		Enterprise Value/ LTM EBITDA
Specialty Services
06/08		Investor Group		Expro International Group PLC			13.1x
07/01		Technip SA		Coflexip Stena Offshore Group SA			14.3x
Pressure Pumping
06/14		C&J Energy Services Inc.		Nabors Industries Ltd.			8.9x
04/11		Temasek Holdings, Pte.		Frac Tech Holdings LLC			7.3x

 

NA refers to not available.

Taking into account the results of the selected transactions analysis, Credit Suisse applied a multiple range of 9.0x to 11.0x to Baker Hughes’s LTM EBITDA as of September 30, 2014. The selected transactions analysis indicated an implied reference range of $81.24 to $100.68 per share of Baker Hughes common stock, as compared to the implied values of the merger consideration of $78.62 per share of Baker Hughes common stock based on the closing price per share of Halliburton common stock on November 12, 2014 and $80.69 per share of Baker Hughes common stock, based on the closing price per share of Halliburton common stock on November 14, 2014, respectively.

Financial Analyses with Respect to Halliburton

Selected Companies Analysis

Credit Suisse considered certain financial data for Halliburton and selected companies with publicly traded equity securities Credit Suisse deemed relevant. The selected companies were selected because they were deemed to be similar to Halliburton in one or more respects. The financial data reviewed and selected companies for Halliburton were the same as the financial data reviewed and selected companies for Baker Hughes, which are as set forth above under Financial Analyses with Respect to Baker Hughes—Selected Companies Analysis.

Using the Halliburton Projections, and taking into account the results of the selected companies analysis, Credit Suisse applied multiple ranges of 6.50x to 7.50x to Halliburton’s 2014E EBITDA, 5.50x to 6.50x to Halliburton’s 2015E EBITDA, 5.00x to 6.00x to Halliburton’s 2016E EBITDA, 8.00x to 9.00x to Halliburton’s 2014E after-tax cash flow, 6.50x to 7.50x to Halliburton’s 2015E after-tax cash flow, 6.00x to 7.00x to Halliburton’s 2016E after-tax cash flow, 13.00x to 15.00x to Halliburton’s 2014E net income, 10.50x to 12.50x to Halliburton’s 2015E net income, and 9.00x to 11.00x to Halliburton’s 2016E net income. The selected companies analysis indicated an implied reference range of $45.86 to $59.47 per share of Halliburton common stock, as compared to $53.23, the closing price per share of Halliburton common stock on November 12, 2014 and $55.08, the closing price per share of Halliburton common stock on November 14, 2014, respectively.

Discounted Cash Flow Analysis

Credit Suisse performed a discounted cash flow analysis of Halliburton by calculating the estimated net present value of the projected after-tax, unlevered, free cash flow of Halliburton for the period from September 30, 2014 through December 31, 2019 based on the Halliburton Projections. Credit Suisse applied a range of terminal value EBITDA multiples of 6.5x to 8.5x to Halliburton’s estimated 2019E EBITDA. The estimated net present value of the projected future cash flow and terminal values were then calculated using discount rates ranging from 8.5% to 10.5%. The discounted cash flow analysis for Halliburton indicated an implied reference range per share of Halliburton common stock of $56.25 to $78.15 per share of Halliburton common stock, as compared to $53.23, the closing price per share of Halliburton common stock on November 12, 2014 and $55.08, the closing price per share of Halliburton common stock on November 14, 2014, respectively.

 

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Implied Exchange Ratio Analysis

Credit Suisse also performed an implied exchange ratio analysis by deducting the cash consideration of $19.00 per share of Baker Hughes common stock from the implied reference ranges indicated by its financial analyses for Baker Hughes and dividing the result by the implied reference ranges indicated by its financial analyses for Halliburton. To determine the low ends of the implied exchange ratio reference ranges, the low ends of the implied reference ranges indicated by the selected companies analysis, the discounted cash flow analysis and the selected transactions analysis for Baker Hughes (after reduction by the amount of the cash consideration) were divided by the high ends of the implied reference ranges indicated by the selected companies analysis, the discounted cash flow analysis and the selected companies analysis for Halliburton, respectively. To determine the high ends of the implied exchange ratio reference ranges, the high ends of the implied reference ranges indicated by the selected companies analysis, the discounted cash flow analysis and the selected transactions analysis for Baker Hughes (after reduction by the amount of the cash consideration) were divided by the low ends of the implied reference ranges indicated by the selected companies analysis, the discounted cash flow analysis and the selected companies analysis for Halliburton, respectively. The implied exchange ratio analysis indicated implied exchange ratio reference ranges of 0.515x to 1.009x based on the selected companies analyses of Baker Hughes and Halliburton, 0.616x to 1.328x based on the discounted cash flow analyses of Baker Hughes and Halliburton excluding synergies, 0.879x to 1.820x based on the discounted cash flow analyses of Baker Hughes and Halliburton including synergies, and 1.047x to 1.781x based on the selected transactions analysis for Baker Hughes and the selected companies analysis for Halliburton, as compared to the stock consideration of 1.12 shares of Halliburton common stock per share of Baker Hughes common stock.

Other Matters

Halliburton retained Credit Suisse as its financial advisor in connection with the proposed merger. Halliburton selected Credit Suisse based on Credit Suisse’s experience and reputation and Credit Suisse’s knowledge of Halliburton and its industry. Credit Suisse is an internationally recognized investment banking firm and is regularly engaged in the evaluation of businesses and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Credit Suisse will receive a transaction fee of $41 million for its services as financial advisor to Halliburton in connection with the merger, $4 million of which became payable to Credit Suisse upon the rendering of its opinion to the Halliburton Board and the balance of which is contingent upon completion of the merger. In addition, Halliburton has agreed to reimburse certain of Credit Suisse’s expenses and to indemnify Credit Suisse and certain related parties for certain liabilities and other items arising out of or related to its engagement.

Credit Suisse and its affiliates have provided other financial advice and services, and may in the future provide financial advice and services, to Baker Hughes, Halliburton and their respective affiliates for which Credit Suisse and its affiliates have received, and would expect to receive, compensation including, during the past two years, having acted as co-bookrunning lead managing underwriter and a senior managing underwriter of offerings of debt securities by Halliburton in 2013 and co-lead dealer manager in connection with a tender offer by Halliburton for shares of Halliburton common stock in 2013, having acted as a counterparty to Halliburton in connection with certain hedging and derivatives transactions and having made a loan commitment as a participant in Halliburton’s revolving credit facility. In addition, it is currently contemplated that Credit Suisse and its affiliates will provide or otherwise assist Halliburton in obtaining a portion of the financing for the merger and certain related matters and, after giving effect to the merger, any subsequent refinancing of all or a portion of the outstanding indebtedness of Halliburton and Baker Hughes. Credit Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, Credit Suisse and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and the accounts of customers, any currency or commodity that may be involved in the merger and equity, debt and other securities and financial instruments (including bank loans and other obligations) of Baker Hughes, Halliburton and any other company that may be involved in the merger, as well as provide investment banking and other financial services to such companies and their affiliates.

 

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Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated

Halliburton has retained BofA Merrill Lynch to act as a financial advisor in connection with the merger. BofA Merrill Lynch is an internationally recognized investment banking firm, which is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Halliburton selected BofA Merrill Lynch to act as a financial advisor in connection with the merger on the basis of BofA Merrill Lynch’s experience in transactions similar to the merger, its reputation in the investment community and its familiarity with Halliburton and its business.

On November 16, 2014, at a meeting of the Halliburton Board held to evaluate the merger, BofA Merrill Lynch delivered to the Halliburton Board an oral opinion, which was confirmed by delivery of a written opinion dated November 16, 2014, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its opinion, the merger consideration to be paid in the merger by Halliburton was fair, from a financial point of view, to Halliburton.

The full text of BofA Merrill Lynch’s written opinion to the Halliburton Board, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex D to this document and is incorporated by reference herein in its entirety. The following summary of BofA Merrill Lynch’s opinion is qualified in its entirety by reference to the full text of the opinion. BofA Merrill Lynch delivered its opinion to the Halliburton Board for the benefit and use of the Halliburton Board (in its capacity as such) in connection with and for purposes of its evaluation of the merger. BofA Merrill Lynch’s opinion does not address any other aspect of the merger and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Halliburton or in which Halliburton might engage or as to the underlying business decision of Halliburton to proceed with or effect the merger. BofA Merrill Lynch’s opinion does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any related matter.

In connection with rendering its opinion, BofA Merrill Lynch, among other things:

 

•

reviewed certain publicly available business and financial information relating to Baker Hughes and Halliburton;

 

•

reviewed the Halliburton Projections for Baker Hughes;

 

•

reviewed the Halliburton Projections;

 

•

reviewed the Halliburton Estimated Synergies;

 

•

discussed the past and current business, operations, financial condition and prospects of Baker Hughes with members of senior management of Halliburton, and discussed the past and current business, operations, financial condition and prospects of Halliburton with members of senior management of Halliburton;

 

•

reviewed the potential pro forma financial impact of the merger on the future financial performance of Halliburton, including the potential effect on Halliburton’s estimated earnings per share;

 

•

reviewed the trading histories for Baker Hughes common stock and Halliburton common stock and a comparison of such trading histories with each other;

 

•

compared certain financial and stock market information of Baker Hughes and Halliburton with similar information of other companies BofA Merrill Lynch deemed relevant;

 

•

compared certain financial terms of the merger to financial terms, to the extent publicly available, of other transactions BofA Merrill Lynch deemed relevant;

 

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•

reviewed a draft of the merger agreement, dated November 16, 2014 (the “Draft Agreement”); and

 

•

performed such other analyses and studies and considered such other information and factors as BofA Merrill Lynch deemed appropriate.

In arriving at its opinion, BofA Merrill Lynch assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of the management of Halliburton that they were not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to the Halliburton Projections for Baker Hughes, the Halliburton Projections and the Halliburton Estimated Synergies, BofA Merrill Lynch assumed, at the direction of Halliburton, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Halliburton as to the future financial performance of Baker Hughes and Halliburton and the other matters covered thereby. BofA Merrill Lynch relied, at the direction of Halliburton, on the assessments of the management of Halliburton as to Halliburton’s ability to achieve the Halliburton Estimated Synergies and was advised by Halliburton, and assumed, that the Halliburton Estimated Synergies would be realized in the amounts and at the times projected. BofA Merrill Lynch did not have an opportunity to discuss with management of Baker Hughes the accuracy and completeness of the financial and other information and data publicly available concerning Baker Hughes reviewed by or discussed with BofA Merrill Lynch. Further, BofA Merrill Lynch was not provided with, and BofA Merrill Lynch did not have access to, any financial forecasts relating to Baker Hughes prepared by the management of Baker Hughes. Accordingly, with the consent of Halliburton, BofA Merrill Lynch used the Halliburton Projections for Baker Hughes in its analyses and assumed, at the direction of Halliburton, that they were a reasonable basis upon which to evaluate the future financial performance of Baker Hughes. BofA Merrill Lynch did not make or was not provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Baker Hughes, Halliburton or any other entity, nor did it make any physical inspection of the properties or assets of Baker Hughes, Halliburton or any other entity. BofA Merrill Lynch did not evaluate the solvency or fair value of Baker Hughes, Halliburton or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Merrill Lynch assumed, at the direction of Halliburton, that the merger would be consummated in accordance with its terms, without waiver, modification or amendment of any term, condition or agreement that would be material to its analyses or opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on Baker Hughes, Halliburton or the merger (including the Halliburton Estimated Synergies and other contemplated benefits thereof) that would be material to its analyses or its opinion. BofA Merrill Lynch also assumed, at the direction of Halliburton, that the final executed merger agreement would not differ in any material respect from the Draft Agreement reviewed by it.

BofA Merrill Lynch expressed no view or opinion as to any terms or other aspects or implications of the merger (other than the merger consideration to the extent expressly specified in its opinion), including, without limitation, the form or structure of the merger or any terms, aspects or implications of any other arrangement, agreement or understanding entered into in connection with or related to the merger or otherwise. BofA Merrill Lynch’s opinion was limited to the fairness, from a financial point of view, to Halliburton of the merger consideration to be paid by Halliburton in the merger and no opinion or view was expressed with respect to any consideration received in connection with the merger by the holders of any class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration or otherwise. Furthermore, no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Halliburton or in which Halliburton might engage or as to the underlying business decision of Halliburton to proceed with or effect the merger. BofA Merrill Lynch did not express any view or opinion with respect to, and it relied, with the consent of Halliburton, upon the assessments

 

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of representatives of Halliburton regarding, legal, regulatory, accounting, tax and similar matters relating to Baker Hughes, Halliburton or any other entity and the merger (including the contemplated benefits of the merger), as to which BofA Merrill Lynch understood that Halliburton obtained such advice as it deemed necessary from qualified professionals. BofA Merrill Lynch further did not express any opinion as to what the value of Halliburton common stock actually would be when issued or the prices at which Halliburton common stock or Baker Hughes common stock would trade at any time, including following announcement or consummation of the merger. In addition, BofA Merrill Lynch expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the merger or any related matter. Except as described above, Halliburton imposed no other limitations on the investigations made or procedures followed by BofA Merrill Lynch in rendering its opinion.

BofA Merrill Lynch’s opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to BofA Merrill Lynch as of, the date of its opinion. It should be understood that subsequent developments may affect its opinion, and BofA Merrill Lynch does not have any obligation to update, revise or reaffirm its opinion. The issuance of BofA Merrill Lynch’s opinion was approved by BofA Merrill Lynch’s Americas Fairness Opinion Review Committee.

The following represents a brief summary of the material financial analyses presented by BofA Merrill Lynch to the Halliburton Board in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by BofA Merrill Lynch, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by BofA Merrill Lynch. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by BofA Merrill Lynch.

Baker Hughes Financial Analyses

Selected Publicly Traded Companies Analysis. BofA Merrill Lynch reviewed publicly available financial and stock market information for Baker Hughes and the following four publicly traded companies in the oilfield services industry:

 

•

Schlumberger Limited

 

•

Halliburton Company

 

•

National Oilwell Varco, Inc.

 

•

Weatherford International Ltd.

BofA Merrill Lynch reviewed, among other things, enterprise values of the selected publicly traded companies, calculated as equity market value based on fully diluted shares outstanding using the treasury stock method, plus debt, less cash and cash equivalents, plus noncontrolling interest, as a multiple of calendar year 2015 estimated earnings before interest, taxes, depreciation and amortization, commonly referred to as EBITDA. BofA Merrill Lynch also reviewed per share equity values of the selected publicly traded companies, based on closing stock prices on November 14, 2014 and, in the case of Halliburton, November 12, 2014, the last trading day prior to market speculation regarding the merger (the “Unaffected Date”), as a multiple of calendar year 2015 estimated earnings per share, commonly referred to as EPS. Estimated financial data of the selected publicly traded companies were based on publicly available research analysts’ estimates. BofA Merrill Lynch then (i) calculated the product of (A) the enterprise value to calendar year 2015 estimated EBITDA multiples of 5.0x to 6.5x derived from the selected publicly traded companies and (B) Baker Hughes’s calendar year 2015 estimated EBITDA and (ii) calculated the product of (A) the share price to calendar year 2015 estimated EPS multiples of 10.5x to 11.5x derived from the selected publicly traded companies and (B) Baker Hughes’s calendar year 2015 estimated EPS. For the purpose of this calculation, estimated financial data of Baker Hughes was based on the

 

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Halliburton Projections for Baker Hughes. This analysis indicated the following approximate implied per share equity value reference ranges for Baker Hughes, as compared to the merger consideration:

 

Implied Per Share Equity Value Reference Ranges for Baker Hughes						Merger Consideration
2015E EBITDA		2015E EPS
$52.67 - $70.34		$	50.24 - $55.02			$	78.62

Based on these implied per share equity value reference ranges and the closing price of Halliburton common stock on the Unaffected Date, BofA Merrill Lynch calculated the following ranges of approximate implied exchange ratios of shares of Baker Hughes common stock to shares of Halliburton common stock, adjusted for the cash consideration by subtracting the cash consideration of $19.00 per share of Baker Hughes common stock from the implied per share equity value reference ranges for Baker Hughes and dividing that result by the closing price of Halliburton common stock on the Unaffected Date:

 

Implied Exchange Ratio						Merger Exchange Ratio
2015E EBITDA		2015E EPS
0.633x – 0.964x			0.587x – 0.677x				1.120x

No company used in this analysis is directly comparable to Baker Hughes. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which Baker Hughes was compared.

Selected Precedent Transactions Analysis. BofA Merrill Lynch reviewed, to the extent publicly available, financial information relating to the following 15 selected transactions involving companies in the oilfield services industry:

 

Announcement Date		Acquiror		Target
September 22, 2014		Siemens Aktiengesellschaft		Dresser-Rand Group Inc.
June 25, 2014		C&J Energy Services, Inc.		Nabors Industries Ltd. (Completion & Production Businesses)
April 8, 2013		General Electric Company		Lufkin Industries, Inc.
March 8, 2013		KKR & Co. L.P.		Gardner Denver, Inc.
August 9, 2012		National Oilwell Varco, Inc.		Robbins & Myers, Inc.
October 10, 2011		Superior Energy Services, Inc.		Complete Production Services, Inc.
July 20, 2011		Ecolab Inc.		Nalco Holding Company
April 19, 2011		Chesapeake Energy Corporation, Temasek Holdings (Private) Ltd. and RRJ Capital Ltd.		Frac Tech Holdings LLC
February 13, 2011		General Electric Company		John Wood Group PLC (Well Support Division)
August 12, 2010		Seawell Limited		Allis-Chalmers Energy Inc.
February 21, 2010		Schlumberger Limited		Smith International Inc.
August 31, 2009		Baker Hughes Incorporated		BJ Services Company LLC
June 13, 2008		Candover Partners Limited		Expro International Group Plc
June 3, 2008		Smith International, Inc.		W-H Energy Services Inc.
December 17, 2007		National Oilwell Varco, Inc.		Grant Prideco, Inc.

BofA Merrill Lynch reviewed transaction values, calculated as the enterprise value implied for the target company based on the consideration payable in the selected transaction plus debt, less cash and cash equivalents, plus noncontrolling interest, as a multiple, to the extent publicly available, of the target company’s last twelve months’ EBITDA. BofA Merrill Lynch then applied a selected range of last twelve months’ EBITDA multiples of 8.0x to 11.0x derived from the selected transactions to Baker Hughes’s last twelve months’ EBITDA. Estimated financial data of the selected transactions were based on publicly available information, Wall Street research and

 

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company publicly available filings. Baker Hughes’s last twelve months’ EBITDA was based on Baker Hughes’s publicly available filings. This analysis indicated the following approximate implied per share equity value reference range for Baker Hughes, as compared to the merger consideration:

 

Implied Per Share Equity Value Reference Range for Baker Hughes		Merger Consideration
$71.52 - $100.68		$78.62

No company, business or transaction used in this analysis is directly comparable to Baker Hughes or the merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition or other values of the companies, business segments or transactions to which Baker Hughes and the merger were compared.

Discounted Cash Flow Analysis. BofA Merrill Lynch performed a discounted cash flow analysis of Baker Hughes to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Baker Hughes was forecasted to generate during Baker Hughes’s fiscal years 2014 through 2019 based on the Halliburton Projections for Baker Hughes. BofA Merrill Lynch calculated terminal values for Baker Hughes by applying terminal last twelve months’ EBITDA multiples of 6.0x to 8.0x to Baker Hughes’s fiscal year 2019 estimated EBITDA. The cash flows and terminal values were then discounted to present value as of September 30, 2014, using mid-year convention and discount rates ranging from 9.05% to 11.64%, which were based on an estimate of Baker Hughes’s weighted average cost of capital. This analysis indicated the following approximate implied per share equity value reference range for Baker Hughes, excluding the Halliburton Estimated Synergies, as compared to the merger consideration:

 

Implied Per Share Equity Value Reference Range for Baker Hughes		Merger Consideration
$63.51 - $91.07		$78.62

BofA Merrill Lynch also performed a discounted cash flow analysis to calculate the estimated present value of the Halliburton Estimated Synergies. BofA Merrill Lynch calculated terminal values for the Halliburton Estimated Synergies by applying terminal last twelve months’ EBITDA multiples of 6.0x to 8.0x to the fiscal year 2019 estimated Synergies. The estimated after-tax cash flows and terminal values resulting from the Halliburton Estimated Synergies (less the estimated costs to achieve such Halliburton Estimated Synergies) were discounted to present value as of September 30, 2014, using mid-year convention and discount rates ranging from 9.05% to 11.64%, which were based on an estimate of Baker Hughes’s weighted average cost of capital. The implied per share equity value range of the Halliburton Estimated Synergies was then added to the implied per share equity value reference range for Baker Hughes in order to derive the following approximate implied per share equity value reference range for Baker Hughes, including the Halliburton Estimated Synergies, as compared to the merger consideration:

 

Implied Per Share Equity Value Reference Range for Baker Hughes		Merger Consideration
$81.96 - $116.70		$78.62

Based on this implied per share equity value reference range and the closing price of Halliburton common stock on November 12, 2014, BofA Merrill Lynch calculated the following ranges of approximate implied exchange ratios of shares of Baker Hughes common stock to shares of Halliburton common stock, adjusted for the cash consideration by subtracting the cash consideration of $19.00 per share of Baker Hughes common stock from the implied per share equity value reference ranges for Baker Hughes and dividing that result by the closing price of Halliburton common stock on the Unaffected Date:

 

Implied Exchange Ratio				Merger Exchange Ratio
Excluding Halliburton Estimated Synergies		Including Halliburton Estimated Synergies
0.836x – 1.354x		1.183x – 1.835x		1.120x

 

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Halliburton Financial Analyses

Selected Publicly Traded Companies Analysis. BofA Merrill Lynch reviewed publicly available financial and stock market information for Halliburton and the following four publicly traded companies in the oilfield services industry:

 

•

Schlumberger Limited

 

•

Baker Hughes Incorporated

 

•

National Oilwell Varco, Inc.

 

•

Weatherford International Ltd.

BofA Merrill Lynch reviewed, among other things, enterprise values of the selected publicly traded companies, calculated as equity market value, based on fully diluted shares outstanding using the treasury stock method, plus debt, less cash and cash equivalents, plus noncontrolling interest, as a multiple of calendar year 2015 EBITDA. BofA Merrill Lynch also reviewed per share equity values, based on closing stock prices of the selected publicly traded companies, based on closing stock prices on November 14, 2014 and, in the case of Baker Hughes, the Unaffected Date, as a multiple of calendar year 2015 estimated EPS. Estimated financial data of the selected publicly traded companies were based on publicly available research analysts’ estimates. BofA Merrill Lynch then (i) calculated the product of (A) the enterprise value to calendar year 2015 estimated EBITDA multiples of 6.0x to 7.5x derived from the selected publicly traded companies and (B) Halliburton’s calendar year 2015 estimated EBITDA and (ii) calculated the product of (A) the share price to calendar year 2015 estimated EPS multiples of 11.0x to 12.0x derived from the selected publicly traded companies and (B) Halliburton’s calendar year 2015 estimated EPS. For the purpose of this calculation, estimated financial data of Halliburton was based on the Halliburton Projections. This analysis indicated the following approximate implied per share equity value reference ranges for Halliburton, as compared to the closing price of Halliburton common stock on the unaffected date of November 12, 2014:

 

Implied Per Share Equity Value Reference Ranges for Halliburton				Closing Trading Price of Halliburton Common Stock on November 12, 2014
2015E EBITDA		2015E EPS
$50.50 – $64.71		$51.31 – $55.97		$53.23

No company used in this analysis is identical or directly comparable to Halliburton. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which Halliburton was compared.

Discounted Cash Flow Analysis. BofA Merrill Lynch performed a discounted cash flow analysis of Halliburton to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Halliburton was forecasted to generate during Halliburton’s fiscal years 2014 through 2019 based on the Halliburton Projections. BofA Merrill Lynch calculated terminal values for Halliburton by applying terminal value last twelve months’ EBITDA multiples of 6.5x to 8.5x to Halliburton’s calendar year 2019 estimated EBITDA. The cash flows and terminal values were then discounted to present value as of September 30, 2014, using mid-year convention and discount rates ranging from 9.18% to 11.82%, which were based on an estimate of Halliburton’s weighted average cost of capital. This analysis indicated the following approximate implied per share equity value reference range for Halliburton, excluding the Halliburton Estimated Synergies, as compared to the closing price of Halliburton common stock on the unaffected date of November 12, 2014:

 

Implied Per Share Equity Value Reference Range for Halliburton		Closing Trading Price of Halliburton Common Stock on November 12, 2014
$52.77 – $75.56		$53.23

 

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Relative Value Analyses

Historical Exchange Ratio Analysis. BofA Merrill Lynch calculated the average historical exchange ratios of the shares of Baker Hughes common stock to the shares of Halliburton common stock based on the closing prices of Baker Hughes common stock and Halliburton common stock during the six-month, one-year, three-year and five-year periods ended November 12, 2014. BofA Merrill Lynch then calculated the exchange ratio of the shares of Baker Hughes common stock to the shares of Halliburton common stock implied by the merger consideration, which represented a nominal value of $78.62 per share of Baker Hughes common stock based on the closing price of Halliburton common stock on the Unaffected Date. The following table presents the results of this analysis:

 

Time Period (as of November 12, 2014)		Implied Exchange Ratio of Baker Hughes Common Stock to Halliburton Common Stock
6-month Average			1.027x
1-year Average			1.061x
3-year Average			1.178x
5-year Average			1.296x
Consideration			1.477x	(1)

 

(1)	Implied exchange ratio calculated by dividing the value of the merger consideration based on the closing price of Halliburton common stock on the Unaffected Date, including the per share cash consideration of $19.00, by the closing price of Halliburton common stock on the Unaffected Date.

Selected Publicly Traded Companies Analysis. BofA Merrill Lynch applied the implied per share equity value reference ranges derived from the selected publicly traded companies analysis for Halliburton and Baker Hughes to derive an implied exchange ratio, adjusted for the cash consideration by subtracting the cash consideration of $19.00 per share of Baker Hughes common stock from the implied per share equity value reference ranges for Baker Hughes and dividing that result by the closing price of Halliburton common stock on the Unaffected Date. This analysis indicated the following approximate implied exchange ratios of shares of Baker Hughes common stock to shares of Halliburton common stock:

 

Implied Exchange Ratio Ranges				Merger Exchange Ratio
2015E EBITDA		2015E EPS
0.520x – 1.017x		0.558x – 0.702x		1.120x

Discounted Cash Flow Analysis. BofA Merrill Lynch then applied the implied per share equity value reference ranges derived from the discounted cash flow analysis for each of Halliburton and Baker Hughes to derive an implied exchange ratio, adjusted for the cash consideration by subtracting the cash consideration of $19.00 per share of Baker Hughes common stock from the implied per share equity value reference ranges for Baker Hughes and dividing that result by the closing price of Halliburton common stock on the Unaffected Date. This analysis indicated the following approximate implied exchange ratios of shares of Baker Hughes common stock to shares of Halliburton common stock:

 

Implied Exchange Ratio Ranges				Merger Exchange Ratio
Excluding Halliburton Estimated Synergies		Including Halliburton Estimated Synergies
0.589x – 1.366x		0.833x – 1.851x		1.120x

Other Factors

In rendering its opinion, BofA Merrill Lynch also reviewed and considered other factors, including:

 

•

historical trading prices of Halliburton common stock and Baker Hughes common stock during the five-year period ended November 12, 2014;

 

•

certain cost savings estimated by BofA Merrill Lynch to have resulted from each of the transactions included in the selected precedent transactions analysis of Baker Hughes, as compared to the Halliburton Estimated Synergies;

 

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•

the relationship between movements in Halliburton common stock and Baker Hughes common stock during the five-year period ended November 12, 2014, including the average ratio of the closing price of Halliburton common stock to the closing price of Baker Hughes common stock calculated over various periods ended November 12, 2014; and

 

•

the potential pro forma financial effect of the merger on estimated pro forma EPS after taking into account the Halliburton Estimated Synergies, based on the Halliburton Projections for estimated financial data of Halliburton and the Halliburton Projections for Baker Hughes for estimated financial data of Baker Hughes, which indicated that (i) based on 25% run-rate Halliburton Estimated Synergies in fiscal year 2016 and full run-rate Halliburton Estimated Synergies in fiscal year 2017 and including the costs of achieving the Halliburton Estimated Synergies, the merger could be dilutive to estimated pro forma EPS for fiscal year 2016 by approximately 10.1%, and accretive to estimated pro forma EPS for fiscal year 2017 by approximately 1.7%, and (ii) based on full run-rate Halliburton Estimated Synergies in fiscal years 2016 and 2017 and excluding the costs of achieving the Halliburton Estimated Synergies, the merger could be accretive to estimated pro forma EPS for fiscal years 2016 and 2017 by approximately 4.0% and 3.4%, respectively; however, the actual results achieved by the combined company may vary from projected results and the variations may be material.

Miscellaneous

As noted above, the discussion set forth above is a summary of the material financial analyses presented by BofA Merrill Lynch to the Halliburton Board in connection with its opinion and is not a comprehensive description of all analyses undertaken by BofA Merrill Lynch in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Merrill Lynch believes that its analyses summarized above must be considered as a whole. BofA Merrill Lynch further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BofA Merrill Lynch’s analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

In performing its analyses, BofA Merrill Lynch considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of Halliburton and Baker Hughes. The estimates of the future performance of Halliburton and Baker Hughes in or underlying BofA Merrill Lynch’s analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by BofA Merrill Lynch’s analyses. These analyses were prepared solely as part of BofA Merrill Lynch’s analysis of the fairness, from a financial point of view, of the merger consideration and were provided to the Halliburton Board in connection with the delivery of BofA Merrill Lynch’s opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be BofA Merrill Lynch’s view of the actual values of Halliburton or Baker Hughes.

The type and amount of consideration payable in the merger was determined through negotiations between Halliburton and Baker Hughes, rather than by any financial advisor, and was approved by the Halliburton Board. The decision to enter into the merger agreement was solely that of the Halliburton Board. As described above, BofA Merrill Lynch’s opinion and analyses were only one of many factors considered by the Halliburton Board in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Halliburton Board or management with respect to the merger or the merger consideration.

 

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Halliburton has agreed to pay BofA Merrill Lynch for its services in connection with the merger an aggregate fee of $15 million, a portion of which was payable upon the rendering of its opinion and a significant portion of which is contingent upon consummation of the merger. BofA Merrill Lynch and certain of its affiliates also are participating in the financing for the merger, for which services BofA Merrill Lynch and such affiliates will receive significant compensation, including committing to act as lead arranger, initial lender and administrative agent with respect to an $8.6 billion senior unsecured bridge loan facility to Halliburton, a portion of the proceeds of which would be used to fund the cash consideration for the merger. In addition, Halliburton has agreed to reimburse BofA Merrill Lynch’s expenses and indemnify BofA Merrill Lynch against certain liabilities arising out of its engagement.

BofA Merrill Lynch and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Merrill Lynch and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in the equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of Halliburton, Baker Hughes and certain of their respective affiliates.

BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to Halliburton and have received or in the future may receive compensation for the rendering of these services, including (i) acting as a lender to Halliburton under its $3.0 billion revolving credit facility and/or certain other term loans, letters of credit and/or leasing facilities for Halliburton and (ii) acting as co-manager to Halliburton in connection with its $3.0 billion high grade bond offering and as a co-dealer manager in connection with its share repurchase program.

In addition, BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to Baker Hughes and have received or in the future may receive compensation for the rendering of these services, including having acted or acting as a co-lead arranger and bookrunner for, and a lender under, Baker Hughes’s $2.5 billion revolving credit facility and as an issuer in Baker Hughes’s commercial paper program.

 

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Recommendation of the Baker Hughes Board and its Reasons for the Merger

The Baker Hughes Board, with the advice and assistance of its financial and legal advisors, negotiated, evaluated, and, at a meeting held on November 16, 2014, unanimously approved the merger agreement, the merger and the other transactions contemplated thereby. The Baker Hughes Board unanimously recommends that the Baker Hughes stockholders vote FOR the adoption of the merger agreement.

In reaching the decisions to approve the merger agreement and the transactions contemplated thereby and to recommend that the Baker Hughes stockholders vote to adopt the merger agreement and approve the merger, the Baker Hughes Board consulted extensively with its financial and legal advisors and Baker Hughes’s management, and considered a number of potential strategic alternatives to the proposed merger. After such discussions and considering such alternatives, the Baker Hughes Board unanimously determined the proposed merger to be in the best interests of Baker Hughes and its stockholders. The Baker Hughes Board’s decision to approve the merger and the merger agreement and to recommend to Baker Hughes’s stockholders that they vote for the adoption of the merger agreement was based on a number of factors. These factors included, without limitation, the following (which are not necessarily presented in order of relative importance):

Strategic Rationale; Stockholder Value

The Baker Hughes Board considered a number of factors pertaining to the strategic rationale for the merger and the value to be received by Baker Hughes’s stockholders pursuant to the merger, including but not limited to the following:

 

•

The current, historical and projected financial condition and results of operations of Baker Hughes on a stand-alone basis, including the risk-adjusted probabilities associated with achieving Baker Hughes’s long-term strategic plan as a stand-alone company amid greater industry volatility as compared to the opportunity afforded to Baker Hughes stockholders via the merger consideration.

 

•

The risks and challenges facing the industry more broadly, which include (1) volatility of oil and natural gas prices; (2) decreased demand for oil and natural gas due to weakening global economic growth; (3) a highly competitive oilfield services environment; (4) risk of adverse weather conditions; (5) growing geopolitical and terrorism risks; and (6) growing costs and difficulties of compliance with laws and regulations.

 

•

The Baker Hughes Board’s analysis of other potential strategic alternatives for Baker Hughes, including continuing on as an independent company and the potential to acquire, be acquired or combine with other third parties.

 

•

The financial analyses reviewed and discussed with the Baker Hughes Board and the written opinion from Goldman Sachs, Baker Hughes’s financial advisor, to the Baker Hughes Board, dated as of November 16, 2014, that, as of such date and based on and subject to the factors and assumptions set forth in that opinion, the merger consideration to be paid to the holders of Baker Hughes common stock (other than Halliburton and its affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders. The full text of the written opinion of Goldman Sachs is attached to this joint proxy statement/prospectus as Annex E.

 

•

The fact that Goldman Sachs and Baker Hughes’s legal advisors were involved throughout the negotiations and updated the Baker Hughes Board directly and regularly, which provided the Baker Hughes Board with perspectives on the negotiation in addition to those of management.

 

•

The Baker Hughes Board’s belief that it was widely known that Baker Hughes was “in play” and that it was preferable to negotiate on a one-on-one basis with Halliburton rather than to conduct a private or public “auction” or sale process of Baker Hughes, particularly in light of the Board’s belief (1) after consultation with Goldman Sachs, that the level of interest from credible third parties at a valuation in excess of the per share merger consideration was not likely to be significant and (2) the terms of the

 

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merger agreement were consistent with market practice and would not preclude or deter a willing and financially capable third party, were one to exist, from making a superior proposal following the announcement of a transaction with Halliburton.

 

•

The historical and current market prices of Baker Hughes common stock and Halliburton common stock.

 

•

The fact that the Baker Hughes Board, through extensive, arms-length negotiation, was able to effectively obtain an increase in the merger consideration to 1.12 Halliburton shares plus $19.00 in cash from Halliburton’s initial proposal of 1.05 Halliburton shares plus $19.00 in cash.

 

•

The value to be received by holders of Baker Hughes common stock in the merger, including the fact that, as of November 12, 2014, the transaction value represented a premium of:

 

•

54.2% to the closing market price of Baker Hughes common stock on November 12, 2014, the day prior to public confirmation by Baker Hughes that it was in talks with Halliburton regarding a transaction;

 

•

43.1% to the volume weighted average price of Baker Hughes common stock for the 30-day trading period ended November 14, 2014;

 

•

28.6% to the volume weighted average price of Baker Hughes common stock for the 90-day trading period ended November 14, 2014; and

 

•

27.1% to the volume weighted average price of Baker Hughes common stock for the intraday 52-week trading period ended November 14, 2014.

 

•

The fact that the value to be received by holders of Baker Hughes common stock in the merger represented a premium of 40.8% to the closing market price of Baker Hughes on October 10, 2014, the trading day prior to Halliburton’s initial offer to acquire Baker Hughes, based on Halliburton’s closing market price on the same date.

 

•

The fact that a considerable portion of the consideration is payable in stock of Halliburton, which affords Baker Hughes stockholders the opportunity to participate in the combined company’s future growth, while the balance is payable in cash and thus provides a measure of immediate liquidity to Baker Hughes stockholders.

 

•

The fact that the stock portion of the merger consideration is a fixed number of shares of Halliburton common stock, which affords the Baker Hughes stockholders the opportunity to benefit from any increase in the trading price of Halliburton common stock between the announcement and completion of the merger.

 

•

The Baker Hughes Board’s belief that the transaction could be accretive to earnings per shares of the combined company and will be accretive to cash flow per share of the combined company, and that the combined company will maintain a strong investment grade credit profile and substantial financial flexibility.

 

•

The Baker Hughes Board’s belief that the combined company will generate significant free cash flow, allowing the return of cash to the combined investor base through dividends, share repurchases and similar actions.

 

•

The Baker Hughes Board’s belief that the merger will combine complementary product lines, global presence and technology; create an oilfield services supplier with the ability to serve customers through strong positions in key business lines; and have a fully integrated product and services platform, increased capability in the unconventional, deepwater and mature asset sectors, substantial and improved growth opportunities and continued high returns on capital.

 

•

The Baker Hughes Board’s belief that the merger should over time provide substantial efficiencies of scale and geographic scope, particularly in the Eastern Hemisphere, which will enhance fixed cost absorption.

 

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•

The Baker Hughes Board’s belief that the merger will result in operational improvements, especially North American margin improvement, personnel reorganization, real estate, corporate costs, research and development optimization and other administrative and organizational efficiencies.

 

•

The Baker Hughes Board’s belief that the merger will potentially result in meaningful annual cost synergies once Baker Hughes and Halliburton are fully integrated, and the assertion by Halliburton that such annual cost synergies would equal nearly $2 billion.

 

•

The recommendation of Baker Hughes’s senior management team in favor of the transaction.

Terms of the Merger Agreement

The Baker Hughes Board considered the terms and conditions of the merger agreement, including but not limited to the following:

 

•

The Baker Hughes Board’s belief that the terms of the merger agreement, taken as a whole, increase the degree of certainty that the merger will be completed, including the fact that:

 

•

Halliburton is required to take all actions necessary to obtain regulatory approvals, including agreeing to divestitures, unless the assets, business or product lines subject to such actions would account for more than $7.5 billion of 2013 revenue;

 

•

Halliburton has agreed to pay a fee of $3.5 billion if the merger agreement terminates in certain circumstances due to a failure to obtain required antitrust approvals or due to Halliburton’s material breach of its antitrust covenants which breach results in the antitrust closing condition being incapable of being satisfied;

 

•

there are limited circumstances in which the Halliburton Board may terminate the merger agreement or change its recommendation that its stockholders approve the issuance of Halliburton common stock in connection with the merger, and if the merger agreement is terminated by Baker Hughes as a result of a change in recommendation of the Halliburton Board to approve such stock issuance, by Halliburton in order to enter into a definitive agreement with a third party for certain alternative transactions or by either party because Halliburton stockholders have not approved the merger agreement or the transactions contemplated thereby upon a vote taken thereon, then in each case Halliburton has agreed to pay a fee of $1.5 billion; and

 

•

the merger agreement contains no financing condition.

 

•

The Baker Hughes Board’s belief that the terms of the merger agreement, including Baker Hughes’s representations, warranties and covenants and the conditions to each party’s obligations, are reasonable.

 

•

The fact that the merger agreement provides that, under certain circumstances, and subject to certain conditions, Baker Hughes is permitted to furnish information to and conduct negotiations with a third party in connection with an unsolicited proposal for a business combination or acquisition of Baker Hughes that constitutes or is reasonably likely to result in a superior proposal (as defined in the merger agreement).

 

•

The fact that the Baker Hughes Board, subject to certain conditions, has the right to change its recommendation in support of the merger in response to an intervening event, even if there is no competing or superior proposal, if the Baker Hughes Board determines that the failure to take such action would likely be inconsistent with its fiduciary duties.

 

•

The fact that the Baker Hughes Board has the right to terminate the merger agreement to enter into a definitive agreement related to a superior proposal, subject to giving Halliburton notice and an opportunity to propose changes to the merger agreement, and the payment of a termination fee of $1 billion in the event of actual termination. The fact that the Baker Hughes Board, after discussing this

 

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termination fee with its advisors, believed that such fee was consistent with market practice and would not preclude or deter a willing and financially capable third party, were one to exist, from making a superior proposal following the announcement of a transaction with Halliburton.

 

•

The fact that a vote of Baker Hughes’s stockholders on the merger is required under Delaware law, and that if the merger is approved by Baker Hughes’s stockholders and consummated, those Baker Hughes stockholders who do not vote in favor of the adoption of the merger agreement will have the right to demand appraisal of the fair value of their shares under Delaware law.

 

•

The fact that, following the completion of the merger, three members of the Baker Hughes Board will be added to the combined company’s Board.

 

•

The expected qualification of the merger as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

 

•

Baker Hughes’s ability to specifically enforce Halliburton’s obligations under the merger agreement, including Halliburton’s obligations to complete the merger.

Risks and Potentially Negative Factors

In addition to the above factors, the Baker Hughes Board also identified and considered a number of uncertainties, risks and other potentially negative factors in its consideration of the merger and the merger agreement, including without limitation:

 

•

The fact that the merger may not be completed in a timely manner or at all, despite the parties’ efforts and even if the requisite approval is obtained from Baker Hughes stockholders and Halliburton stockholders, if required antitrust approvals are not obtained or if obtaining antitrust approval would require agreeing to divestitures of assets, businesses or product lines that account for more than $7.5 billion of 2013 revenue.

 

•

The fact that Baker Hughes negotiated exclusively with Halliburton rather than conducting a public or private “auction” or sales process of Baker Hughes.

 

•

The risks and costs to Baker Hughes if the merger is not completed, including the diversion of management and employee attention, potential employee attrition and the potential effect on Baker Hughes’s business and relations with customers, suppliers and vendors.

 

•

The transaction costs to be incurred in connection with the merger.

 

•

The restrictions on the conduct of Baker Hughes’s business prior to completion of the merger, which could delay or prevent Baker Hughes from undertaking material strategic opportunities that might arise pending completion of the merger to the detriment of Baker Hughes’s stockholders.

 

•

The risk of not realizing all of the anticipated strategic and other benefits between Halliburton and Baker Hughes, including, without limitation, the challenges of combining the businesses, operations and workforces of Halliburton and Baker Hughes, the risk that expected operating efficiencies and cost savings may not be realized or will cost more to achieve than anticipated, and the risk that divestitures required by antitrust authorities may decrease the anticipated strategic and other benefits of the merger to the combined company.

 

•

The fact that the stock portion of the merger consideration is a fixed number of shares of Halliburton common stock, which could result in the Baker Hughes stockholders being adversely affected by a decrease in the trading price of Halliburton common stock after the date of execution of the merger agreement.

 

•

The fact that, consistent with the expected qualification of the merger as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, Baker Hughes’s

 

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stockholders will, for U.S. federal income tax purposes, recognize taxable gain, if any, on the merger up to the amount of the cash portion of the merger consideration they receive.

 

•

The fact that Baker Hughes’s directors and executive officers may have interests in the merger that are different from, or in addition to, those of Baker Hughes’s stockholders generally, including certain interests arising from the employment and compensation arrangements of Baker Hughes’s executive officers, and the manner in which they would be affected by the merger.

The Baker Hughes Board weighed these positive and negative factors, realizing that future results are uncertain, including any future results considered or expected in the factors noted above. In addition, many of the nonfinancial factors considered were highly subjective. As a result, in view of the number and variety of factors they considered, the Baker Hughes Board did not consider it practicable and did not attempt to quantify or otherwise assign relative weights to the specific factors it considered. Rather, the Baker Hughes Board made its determination based on the totality of the information it considered. Individually, each director may have given greater or lesser weight to a particular factor or consideration.

The Baker Hughes Board believed that, overall, the potential benefits of the merger to Baker Hughes and its stockholders outweighed the risks mentioned above.

The foregoing discussion of the information and factors considered by the Baker Hughes Board is forward-looking in nature. This information should be read in light of the factors described under the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 41 of this joint proxy statement/prospectus

Opinion of Baker Hughes’s Financial Advisor

Goldman Sachs rendered its opinion to the Baker Hughes Board that, as of November 16, 2014 and based upon and subject to the factors and assumptions set forth therein, the aggregate of $19.00 in cash and 1.12 shares of common stock of Halliburton per share of Baker Hughes common stock to be paid to holders (other than Halliburton and its affiliates) of the outstanding shares of Baker Hughes common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated November 16, 2014, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex E. Goldman Sachs provided its opinion for the information and assistance of the Baker Hughes Board in connection with its consideration of the transaction contemplated by the merger agreement. The Goldman Sachs opinion does not constitute a recommendation as to how any Baker Hughes stockholder should vote with respect to the transaction contemplated by the merger agreement or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

•

the merger agreement;

 

•

annual reports to stockholders and Annual Reports on Form 10-K of Baker Hughes and Halliburton for the five fiscal years ended December 31, 2013;

 

•

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Baker Hughes and Halliburton;

 

•

certain other communications from Baker Hughes and Halliburton to their respective stockholders;

 

•

certain publicly available research analyst reports for Baker Hughes and Halliburton; and

 

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•

certain internal financial analyses and forecasts for Baker Hughes and certain financial analyses and forecasts for Halliburton, in each case prepared by the management of Baker Hughes and approved for Goldman Sachs’s use by Baker Hughes, which are referred to as the “Baker Hughes Projections” and the “Baker Hughes Projections for Halliburton” and certain operating synergies projected by the management of Baker Hughes to result from the transaction contemplated by the merger agreement and approved for Goldman Sachs’s use by Baker Hughes, which are referred to as the “Baker Hughes Synergies.”

Goldman Sachs also held discussions with members of the senior management of Baker Hughes regarding its assessment of the strategic rationale for, and the potential benefits of, the transaction contemplated by the merger agreement and the past and current business operations, financial condition, and future prospects of Baker Hughes and Halliburton; reviewed the reported price and trading activity for the shares of Baker Hughes common stock and the shares of Halliburton common stock; compared certain financial and stock market information for Baker Hughes and Halliburton with similar information for certain other companies the securities of which are publicly traded; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering this opinion, Goldman Sachs, with the consent of Baker Hughes, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with the consent of Baker Hughes that the Baker Hughes Projections, the Baker Hughes Projections for Halliburton and the Baker Hughes Synergies were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Baker Hughes. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Baker Hughes or Halliburton or any of their respective subsidiaries and it was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the transaction contemplated by the merger agreement will be obtained without any adverse effect on Baker Hughes or Halliburton or on the expected benefits of the transaction contemplated by the merger agreement in any way meaningful to its analysis. Goldman Sachs has also assumed that the transaction contemplated by the merger agreement will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’s opinion does not address the underlying business decision of Baker Hughes to engage in, or the relative merits of, the transaction contemplated by the merger agreement as compared to any strategic alternatives that may be available to Baker Hughes; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, Baker Hughes or any other alternative transaction. Goldman Sachs’s opinion addresses only the fairness from a financial point of view, as of the date of the opinion, of the merger consideration to be paid to the holders of shares (other than Halliburton and its affiliates) of Baker Hughes common stock pursuant to the merger agreement. Goldman Sachs’s opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the transaction contemplated by the merger agreement or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transaction contemplated by the merger agreement, including the fairness of the transaction contemplated by the merger agreement to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of Baker Hughes; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Baker Hughes or Halliburton, or class of such persons, in connection with the transaction contemplated by the merger agreement, whether relative to the merger consideration to be paid to the holders of shares (other than Halliburton and its affiliates) of Baker Hughes common stock pursuant to the merger agreement or otherwise. Goldman Sachs’s opinion was necessarily based on economic, monetary, market

 

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and other conditions as in effect on, and the information made available to it as of, the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. In addition, Goldman Sachs does not express any opinion as to the prices at which shares of Halliburton common stock will trade at any time or as to the impact of the transaction contemplated by the merger agreement on the solvency or viability of Baker Hughes or Halliburton or the ability of Baker Hughes or Halliburton to pay their respective obligations when they come due. Goldman Sachs’s opinion was approved by a fairness committee of Goldman Sachs.

The following is a summary of the material financial analyses delivered by Goldman Sachs to the Baker Hughes Board in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’s financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 14, 2014, the last trading day before the public announcement of the transaction contemplated by the merger agreement and is not necessarily indicative of current market conditions.

Historical Stock Trading Analysis. Goldman Sachs reviewed the historical trading prices and volumes for the shares of Baker Hughes common stock from April 6, 1987, the date of the initial public offering of Baker Hughes, to November 14, 2014. In addition, Goldman Sachs analyzed the $80.69 implied consideration per share of Baker Hughes common stock (as of November 14, 2014) to be paid to holders (other than Halliburton and its affiliates) of shares of Baker Hughes common stock pursuant to the merger agreement, in relation to the closing market price of shares of Baker Hughes common stock on November 14, 2014, the volume weighted average price of shares of Baker Hughes common stock during the 30-day trading period, 90-day trading period and 52-week trading period ended November 14, 2014, and the 52-week and 3-year high market price of the shares of Baker Hughes common stock for the period ended November 14, 2014.

This analysis indicated that the $80.69 implied consideration per share of Baker Hughes common stock (as of November 14, 2014) to be paid to holders (other than Halliburton and its affiliates) of shares of Baker Hughes common stock pursuant to the merger agreement represented:

 

•

a premium of 34.7% to the closing market price on November 14, 2014 of $59.89 per share;

 

•

a premium of 46.9% to the volume weighted average price for the 30-day trading period ended November 14, 2014 of $54.93 per share;

 

•

a premium of 32.0% to the volume weighted average price for the 90-day trading period ended November 14, 2014 of $61.15 per share;

 

•

a premium of 30.4% to the volume weighted average price for the intraday 52-week trading period ended November 14, 2014 of $61.86 per share;

 

•

a premium of 6.7% to the 52-week high price on July 2, 2014 of $75.64 per share; and

 

•

a premium of 7.1% to the 3-year high price of $75.35 per share.

Goldman Sachs also analyzed the $78.62 implied consideration per share of Baker Hughes common stock (as of November 12, 2014) to be paid to holders (other than Halliburton and its affiliates) of shares of Baker Hughes common stock pursuant to the merger agreement, in relation to the closing market price of shares of Baker Hughes common stock on November 12, 2014 (the day prior to public confirmation by Baker Hughes that it was engaged in preliminary discussions with Halliburton regarding a potential business combination transaction), the volume weighted average price of shares of Baker Hughes common stock during the 30-day trading period, 90-day trading

 

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period and 52-week trading period ended November 14, 2014, and the 52-week and 3-year high market price of the shares of Baker Hughes common stock for the period ended November 14, 2014.

This analysis indicated that the $78.62 implied consideration per share of Baker Hughes common stock (as of November 12, 2014) to be paid to holders (other than Halliburton and its affiliates) of shares of Baker Hughes common stock pursuant to the merger agreement represented:

 

•

a premium of 54.2% to the closing market price on November 12, 2014 of $50.98 per share;

 

•

a premium of 43.1% to the volume weighted average price for the 30-day trading period ended November 14, 2014 of $54.93 per share;

 

•

a premium of 28.6% to the volume weighted average price for the 90-day trading period ended November 14, 2014 of $61.15 per share;

 

•

a premium of 27.1% to the volume weighted average price for the intraday 52-week trading period ended November 14, 2014 of $61.86 per share;

 

•

a premium of 3.9% to the 52-week high price on July 2, 2014 of $75.64 per share; and

 

•

a premium of 4.3% to the 3-year high price of $75.35 per share.

Multiples Analysis. Goldman Sachs calculated various financial multiples and ratios for Baker Hughes using the closing price of shares of Baker Hughes common stock on November 12, 2014 (the day prior to public confirmation by Baker Hughes that it was in talks with Halliburton regarding a transaction), the closing price of shares of Baker Hughes common stock on November 14, 2014, the $80.69 implied consideration per share of Baker Hughes common stock (as of November 14, 2014) to be paid to holders (other than Halliburton and its affiliates) of shares of Baker Hughes common stock pursuant to the merger agreement, the Baker Hughes Projections and median estimates from the Institutional Brokers’ Estimate System (“IBES”).

In particular, Goldman Sachs calculated:

 

•

enterprise value (“EV”), which is the market capitalization of the applicable company based on the closing price of shares of the applicable company’s common stock and the number of shares of the applicable company’s common stock outstanding as of, in the case of Baker Hughes, October 31, 2014, and in the case of Halliburton, October 17, 2014, plus the total debt amount, less cash and equivalents and less non-controlling interests as of such specified date, as a multiple of such company’s estimated earnings before interest, taxes, depreciation and amortization (“EBITDA”), which is referred to below as “EV/EBITDA”, for 2014, 2015 and 2016, respectively;

 

•

closing price of the shares of the applicable company’s common stock on the specified date as a multiple of estimated earnings per share of the applicable company’s common stock, which is referred to below as (“P/EPS”), for 2014, 2015 and 2016, respectively; and

 

•

closing price of the shares of the applicable company’s common stock on the specified date as a multiple of estimated cash flow per share of the applicable company’s common stock, which is referred to below as (“P/CFPS”), for 2014, 2015 and 2016, respectively.

 

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The following table presents the results of these analyses:

 

Baker Hughes

November 12, 2014 closing price of Baker Hughes common stock (Baker Hughes Projections)

November 14, 2014 closing price of Baker Hughes common stock (Baker Hughes Projections)

November 14, 2014 closing price of Baker Hughes common stock (IBES)

Implied merger consideration as of November 14, 2014 (Baker Hughes Projections)

EV/EBITDA

2014E

5.4x

6.2x

—

8.1x

2015E

5.2x

6.0x

5.5x

7.8x

2016E

4.8x

5.5x

5.0x

7.2x

P/EPS

2014E

12.6x

14.9x

—

20.0x

2015E

11.3x

13.3x

12.3x

17.9x

2016E

9.5x

11.2x

10.7x

15.1x

P/CFPS

2014E

8.0x

9.4x

—

12.6x

2015E

6.0x

7.1x

6.6x

9.6x

2016E

5.4x

6.3x

6.1x

8.5x

 

*	2014 multiples based on median estimates from IBES not calculated.

Goldman Sachs also calculated similar financial multiples and ratios for Halliburton using the closing price of shares of Halliburton common stock on November 14, 2014, the Baker Hughes Projections for Halliburton and median estimates from IBES.

The following table presents the results of these analyses:

 

		Halliburton
		November 14, 2014 closing price of Halliburton common stock (Baker Hughes Projections for Halliburton)				November 14, 2014 closing price of Halliburton common stock (IBES)
EV/EBITDA
2014E			7.6x				—
2015E			7.1x				6.4x
2016E			6.6x				5.8x
P/EPS
2014E			14.0x				—
2015E			13.1x				11.2x
2016E			11.7x				9.8x
P/CFPS
2014E			10.8x				—
2015E			8.3x				7.4x
2016E			7.5x				6.6x

 

*	2014 multiples based on median estimates from IBES not calculated.

Illustrative Discounted Cash Flow Analysis. Goldman Sachs performed an illustrative discounted cash flow analysis of Baker Hughes using the Baker Hughes Projections to generate ranges for the implied present value per share of Baker Hughes common stock. Using discount rates ranging from 10.0% to 12.0%, reflecting estimates of the weighted average cost of capital of Baker Hughes, Goldman Sachs calculated an illustrative range of implied enterprise values for Baker Hughes by discounting to present values, as of September 30, 2014,

 

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estimates of Baker Hughes’s unlevered free cash flows for the period September 30, 2014 to December 31, 2019, assuming mid-year convention, and illustrative terminal values based on perpetuity growth rates ranging from 1.0% to 3.0%. The range of perpetuity growth rates was estimated by Goldman Sachs using its professional judgment and experience and taking into account the Baker Hughes Projections. Goldman Sachs also cross-checked such estimates of perpetuity growth rates against the EBITDA multiples that are implied by such growth rates and a range of discount rates to be applied to Baker Hughes’s future unlevered cash flow forecasts. Goldman Sachs then calculated the implied value per share of Baker Hughes common stock by adding the value of Baker Hughes’s net debt and dividing the result by the number of fully diluted outstanding shares of Baker Hughes according to the Baker Hughes Projections. This analysis indicated an illustrative range of present values of $54.52 to $82.19 per share of Baker Hughes common stock.

Goldman Sachs also performed an illustrative discounted cash flow analysis of Halliburton using the Baker Hughes Projections for Halliburton to generate reference ranges for the implied present value per share of Halliburton common stock. Using discount rates ranging from 10.0% to 12.0%, reflecting estimates of the weighted average cost of capital of Halliburton, Goldman Sachs calculated an illustrative range of implied enterprise values for Halliburton by discounting to present values, as of September 30, 2014, estimates of Halliburton’s unlevered free cash flows for the period September 30, 2014 to December 31, 2019, assuming mid-year convention, and terminal values based on perpetuity growth rates ranging from 2.0% to 4.0%. The range of perpetuity growth rates was estimated by Goldman Sachs using its professional judgment and experience and taking into account the Baker Hughes Projections for Halliburton. Goldman Sachs also cross-checked such estimates of perpetuity growth rates against the EBITDA multiples that are implied by such growth rates and a range of discount rates to be applied to Halliburton’s future unlevered cash flow forecasts. Goldman Sachs then calculated the implied value per share of Halliburton common stock by adding the value of Halliburton’s net debt and dividing the result by the number of fully diluted outstanding shares of Halliburton according to the Baker Hughes Projections for Halliburton. This analysis indicated an illustrative range of present values of $42.28 to $71.29 per share of Halliburton common stock.

Illustrative Pro Forma Discounted Cash Flow Analysis. Goldman Sachs also performed an illustrative pro forma discounted cash flow analysis of the combined company using the Baker Hughes Projections, the Baker Hughes Projections for Halliburton and the Baker Hughes Synergies to generate reference ranges for the implied value to be received by holders (other than Halliburton and its affiliates) of shares of Baker Hughes common stock following consummation of the merger. Using discount rates ranging from 10.0% to 12.0%, reflecting pro forma estimates of the weighted average cost of capital of the combined company, Goldman Sachs calculated an illustrative range of implied enterprise values for the combined company by discounting to present values, as of September 30, 2014, estimates of unlevered free cash flows of the combined company for the period September 30, 2014 to December 31, 2019, assuming mid-year convention, and terminal values based on perpetuity growth rates ranging from 2.0% to 4.0%. The range of perpetuity growth rates was estimated by Goldman Sachs using its professional judgment and experience and taking into account the Baker Hughes Projections and the Baker Hughes Projections for Halliburton. Goldman Sachs also cross-checked such estimates of perpetuity growth rates against the EBITDA multiples that are implied by such growth rates and a range of discount rates to be applied to the combined company’s future unlevered cash flow forecasts. Goldman Sachs performed the analysis assuming that specified assets of Baker Hughes were divested and specified net proceeds were received for such assets in connection with consummation of the merger, as provided by Baker Hughes management. Goldman Sachs then calculated the implied value to be received for each share of Baker Hughes common stock in the merger by adding the $19.00 in cash plus the implied value of 1.12 pro forma shares of common stock of the combined company to be paid to holders (other than Halliburton and its affiliates) of shares of Baker Hughes common stock pursuant to the merger agreement. This analysis indicated an illustrative range of present values of $62.41 to $91.53 per share of common stock of Baker Hughes, excluding the Baker Hughes Synergies, and a range of $70.68 to $104.73 per share of common stock of Baker Hughes including the Baker Hughes Synergies.

Illustrative Pro Forma Accretion/Dilution Analysis. Goldman Sachs prepared an illustrative pro forma analysis of the potential financial impact of the transaction contemplated by the merger agreement using the

 

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Baker Hughes Projections, the Baker Hughes Projections for Halliburton and the Baker Hughes Synergies and assuming that specified assets of Baker Hughes were divested and specified net proceeds were received for such assets in connection with the consummation of the merger, as provided by Baker Hughes management. Goldman Sachs prepared its illustrative pro forma analysis for three different scenarios: (a) excluding the Baker Hughes Synergies and any divestitures of assets of Baker Hughes in connection with the consummation of the merger; (b) including the Baker Hughes Synergies and excluding any divestitures of assets of Baker Hughes in connection with the consummation of the merger; and (c) including the Baker Hughes Synergies and divestitures of specified assets of Baker Hughes and receipt of specified net proceeds in connection with the consummation of the merger, as provided by Baker Hughes management. For each of 2015 and 2016, Goldman Sachs compared the projected earnings and cash flow per share of Halliburton common stock, on a stand-alone basis, to the projected earnings and cash flow per share of Halliburton common stock on a pro forma basis following consummation of the merger.

 

		Accretion/Dilution
		No Synergies/No Divestitures				Including Synergies/No Divestitures				Including Synergies/Including Divestitures
2015E EPS			(6.3	)%			(1.2	)%			(2.7	)%
2016E EPS			(5.3	)%			8.6	%			8.4	%
2015E CFPS			1.5	%			4.8	%			0.7	%
2016E CFPS			0.8	%			9.8	%			6.4	%

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’s opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company used in the above analyses as a comparison is directly comparable to Baker Hughes or Halliburton.

Goldman Sachs prepared these analyses for purposes of Goldman Sachs’s providing its opinion to the Baker Hughes Board as to the fairness from a financial point of view of the merger consideration to be paid to the holders (other than Halliburton and its affiliates) of the outstanding shares of Baker Hughes common stock pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Baker Hughes, Halliburton, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration was determined through arm’s-length negotiations between Baker Hughes and Halliburton and was approved by the Baker Hughes Board. Goldman Sachs did not recommend any specific amount of consideration to Baker Hughes or the Baker Hughes Board or that any specific amount of consideration constituted the only appropriate consideration for the transaction contemplated by the merger agreement.

Goldman Sachs’s opinion to the Baker Hughes Board was one of many factors taken into consideration by the Baker Hughes Board in making its determination to approve the transaction contemplated by the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex E.

 

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Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests, or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of Baker Hughes, Halliburton, any of their respective affiliates and third parties, or any currency or commodity that may be involved in the transaction contemplated by the merger agreement. Goldman Sachs acted as financial advisor to Baker Hughes in connection with, and participated in certain of the negotiations leading to, the transaction contemplated by the merger agreement. Goldman Sachs has provided certain financial advisory and underwriting services to Baker Hughes and its affiliates from time to time. During the two year period ended November 16, 2014, the Investment Banking Division of Goldman Sachs has not received any compensation for financial advisory or underwriting services provided to Baker Hughes or its affiliates. Goldman Sachs has also provided certain financial advisory and underwriting services to Halliburton and its affiliates for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation, including having acted as co-manager with respect to the public offering of Halliburton’s 1.00% Senior Notes due 2016 (aggregate principal amount $600,000,000), 2.00% Senior Notes due 2018 (aggregate principal amount $400,000,000) and 3.50% Senior Notes due 2023 (aggregate principal amount $1,100,000,000) in July 2013; and as joint book-running manager with respect to the public offering of Halliburton’s 4.75% Senior Notes due 2043 (aggregate principal amount $900,000,000) in July 2013. During the two year period ended November 16, 2014, the Investment Banking Division of Goldman Sachs has received compensation for financial advisory and underwriting services provided to Halliburton and its affiliates of approximately $600,000. Goldman Sachs may also in the future provide investment banking services to Baker Hughes, Halliburton and their respective affiliates for which the Investment Banking Division of Goldman Sachs may receive compensation.

The Baker Hughes Board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transaction contemplated by the merger agreement. Pursuant to a letter agreement, dated November 12, 2014, Baker Hughes engaged Goldman Sachs to act as its financial advisor in connection with the transaction contemplated by the merger agreement. The engagement letter between Baker Hughes and Goldman Sachs provides for compensation to be paid to Goldman Sachs that is estimated, based on information available as of February 12, 2015, at approximately $45 million, approximately $10 million of which was paid on February 6, 2015, and the remainder of which is payable upon consummation of the transaction contemplated by the merger agreement. The amount of compensation to be paid at the consummation of the merger will depend on the price of Halliburton common stock at the time of such consummation. In addition, Baker Hughes has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Forward-Looking Financial Information

Halliburton prepared forward-looking financial information for years 2014 through 2019 for each of Halliburton and Baker Hughes. Baker Hughes also prepared forward-looking financial information for years 2014 through 2019 for each of Halliburton and Baker Hughes. The forward-looking financial information prepared by each of the companies is on a stand-alone basis and is not intended to be added together, and adding together the forward-looking financial information for the two companies would not represent the results the combined company will achieve if the merger is completed and does not represent forward-looking financial information for the combined company. The following forward-looking financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to forward-looking financial information.

 

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Halliburton Forward-Looking Financial Information

Halliburton does not as a matter of course make public projections as to future earnings or other results of operations (other than providing estimates for certain financial items on a near-term basis in its regular earnings press releases and other communications with investors) or detailed business plans or strategies. However, for internal purposes and in connection with the process leading to the merger agreement, the management of Halliburton prepared certain projections of future financial and operating performance for each of Halliburton and Baker Hughes for the years 2014 through 2019. Halliburton prepared its Baker Hughes projections based on publicly available information. These projections are included in this joint proxy statement/prospectus because Halliburton provided such projections to the Halliburton Board and to Halliburton’s financial advisors, Credit Suisse and BofA Merrill Lynch, in connection with the merger, and are referred to as the Halliburton Projections and the Halliburton Projections for Baker Hughes, respectively. In addition, Halliburton prepared estimates of annual cost synergies expected to be realized following the closing, which are referred to as the Halliburton Estimated Synergies. The Halliburton Estimated Synergies are not reflected in the projections of future financial and operating performance. Halliburton authorized Credit Suisse and BofA Merrill Lynch to use and rely upon the Halliburton Projections, the Halliburton Projections for Baker Hughes and the Halliburton Estimated Synergies in providing advice to the Halliburton Board in relation to the proposed merger. In the view of Halliburton’s management, the information was prepared on a reasonable basis and reflected the best currently available estimates and judgments at the time of preparation, and presented at the time of preparation, to the best of Halliburton management’s knowledge and belief, reasonable projections of the future financial performances of Halliburton and Baker Hughes. However, the projections have not been updated, are not fact and should not be relied upon as being indicative of future results, and readers of this joint proxy statement/prospectus are cautioned not to rely on this forward-looking financial information.

Neither Halliburton’s nor Baker Hughes’ independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the forward-looking financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the forward-looking financial information.

The following table presents a summary of the Halliburton Projections and the Halliburton Projections for Baker Hughes.

 

		Halliburton Company (In millions)
		2014E				2015E				2016E				2017E				2018E				2019E
Revenue			33,059				35,470				37,721				40,739				42,776				44,915
EBITDA(1)			7,270				8,348				9,285				10,027				10,529				11,055
Net income			3,442				4,053				4,651				5,044				5,310				5,588
		Baker Hughes Incorporated (In millions)
		2014E				2015E				2016E				2017E				2018E				2019E
Revenue			24,425				25,860				27,242				29,421				30,893				32,437
EBITDA(1)			4,682				5,271				5,811				6,276				6,590				6,919
Net income			1,739				2,083				2,402				2,606				2,744				2,889

 

(1)

EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure, as it excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in financial statements. EBITDA was used by management to provide additional information in order to provide them with an alternative method for assessing Halliburton’s and Baker Hughes’s financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP, and

 

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may be different from or inconsistent with non-GAAP financial measures used by other companies. EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP or as a measure of a company’s profitability or liquidity.

In addition, Halliburton provided Credit Suisse and BofA Merrill Lynch with estimates of cost synergies, the midpoint of which was $1.75 billion annually upon full integration. The midpoint of the range is below Halliburton management’s expectation for estimates of cost synergies that would actually be achieved upon full integration of Baker Hughes.

The forward-looking information for Halliburton and Baker Hughes were each prepared on the assumption, among others, that revenue and operating margins for each company for 2014-2016 would be in accordance with consensus estimates published by independent research analysts and that growth in revenue and changes in operating margins for 2017-2019 would be in accordance with internally prepared assumed rates.

The assumptions and estimates underlying forward-looking information for Halliburton and Baker Hughes are inherently uncertain and, though considered reasonable by Halliburton’s management as of the date of their preparation, are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause actual results to differ materially from those contained therein, including, among others, the following: the ultimate timing, outcome and results of integrating the operations of Halliburton and Baker Hughes and the degree to which Halliburton’s operating efficiencies are applied to Baker Hughes products and services; changes in the demand for or price of oil and/or natural gas; changes in government regulations and regulatory requirements, particularly those related to offshore oil and natural gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services and climate-related initiatives; impairment of oil and natural gas properties; and structural changes in the oil and natural gas industry, and other matters described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 41 of this joint proxy statement/prospectus, “Risk Factors” beginning on page 32 of this joint proxy statement/prospectus, and Part I, Item IA in Halliburton’s 2013 Annual Report on Form 10-K. The Halliburton Synergies, the Halliburton Projections and the Halliburton Projections for Baker Hughes also reflect assumptions as to certain business decisions that are subject to change. Accordingly, there can be no assurance that the forward-looking results are indicative of the future performance of Halliburton or Baker Hughes or that actual results will not differ materially from those presented in the Halliburton Estimated Synergies, the Halliburton Projections or the Halliburton Projections for Baker Hughes. Inclusion of the Halliburton Estimated Synergies, the Halliburton Projections and the Halliburton Projections for Baker Hughes in this joint proxy statement/prospectus should not be regarded as a representation by any person that the results contained in the forward-looking financial information will be achieved.

Halliburton does not intend to update or otherwise revise the forward-looking financial information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error. Furthermore, Halliburton does not intend to update or revise the forward-looking financial information in this joint proxy statement/prospectus to reflect changes in general economic or industry conditions.

The information concerning forward-looking financial information provided by Halliburton is not included in this joint proxy statement/prospectus in order to induce any stockholder to vote in favor of the stock issuance or to acquire securities of Halliburton.

Baker Hughes Forward-Looking Financial Information

Baker Hughes does not as a matter of course make public projections as to future earnings or other results of operations other than providing estimates for certain financial items on a near-term basis on its regular earnings calls. However, for internal purposes and in connection with the process leading to the merger agreement, the

 

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management of Baker Hughes prepared certain projections of future financial and operating performance of each of Baker Hughes and Halliburton for the years 2014 through 2019. Baker Hughes prepared its Halliburton projections based on publicly available information. These projections are included in this joint proxy statement/prospectus because Baker Hughes provided such projections to its financial advisor, Goldman Sachs, in connection with the merger. Baker Hughes discussed these projections with the Baker Hughes Board in connection with Goldman Sachs’ presentations during the special meetings of the Baker Hughes Board held on November 8, 2014 and November 16, 2014, and these projections are referred to as the Baker Hughes Projections and the Baker Hughes Projections for Halliburton. The following prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. In the view of Baker Hughes’s management, the information was prepared on a reasonable basis and reflected the best then currently available estimates and judgments at the time of its preparation, and presented at the time of its preparation, to the best of Baker Hughes management’s knowledge and belief, reasonable projections of the future financial performance of Baker Hughes and Halliburton. However, these projections have not been updated, are not fact and should not be relied upon as being indicative of future results, and readers of this joint proxy statement/prospectus are cautioned not to rely on this forward-looking financial information.

Neither Baker Hughes’s nor Halliburton’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the forward-looking financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the forward-looking financial information.

The following tables present a summary of the Baker Hughes Projections and the Baker Hughes Projections for Halliburton.

 

		Baker Hughes Incorporated (In millions)
		Year Ended December 31,
		2014E				2015E				2016E				2017E				2018E				2019E
Revenue		$	24,427			$	24,628			$	25,646			$	26,985			$	28,334			$	29,751
Net Income		$	1,770			$	1,907			$	2,176			$	2,431			$	2,683			$	2,954
EBITDA (1)		$	4,763			$	4,956			$	5,360			$	5,732			$	6,121			$	6,529
		Halliburton Company (In millions)
		Year Ended December 31,
		2014E				2015E				2016E				2017E				2018E				2019E
Revenue		$	33,090			$	34,120			$	35,510			$	37,257			$	39,687			$	42,275
Net Income		$	3,363			$	3,521			$	3,841			$	4,183			$	4,522			$	4,884
EBITDA (1)		$	7,151			$	7,652			$	8,247			$	8,684			$	9,237			$	9,824

 

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Baker Hughes also prepared, for illustrative purposes only, certain additional projections of future financial and operating performance of Baker Hughes for the years 2014 through 2019, which are shown below. These projections are included in this joint proxy statement/prospectus because Baker Hughes provided such projections to its financial advisor, Goldman Sachs, in connection with the merger. Baker Hughes discussed these projections with the Baker Hughes Board in connection with Goldman Sachs’ presentation during the special meeting of the Baker Hughes Board held on November 8, 2014. However, Baker Hughes management instructed Goldman Sachs to use the Baker Hughes Projections above, and not the additional projections below, because Baker Hughes management believed that the Baker Hughes Projections above represent their best current estimate of the future financial performance of Baker Hughes.

 

		Baker Hughes Incorporated (In millions)
		Year Ended December 31,
		2014E				2015E				2016E				2017E				2018E				2019E
Revenue		$	24,427			$	25,839			$	27,265			$	29,115			$	30,565			$	32,097
Net Income		$	1,770			$	2,203			$	2,633			$	2,932			$	3,210			$	3,506
EBITDA(1)		$	4,763			$	5,448			$	6,131			$	6,709			$	7,128			$	7,568

(1) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure, as it excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in financial statements. EBITDA was used by management to provide additional information in order to provide them with an alternative method for assessing Baker Hughes’s and Halliburton’s financial condition and operating results. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. EBITDA should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP or as a measure of a company’s profitability or liquidity.

Baker Hughes also prepared and approved for its financial advisor’s use certain operating synergies projected by the management of Baker Hughes to result from the transaction contemplated by the merger agreement. These synergies were projected to be $400 million in 2015, $1,200 million in 2016 and $1,600 million in 2017 and thereafter.

The estimates and assumptions underlying the forward-looking financial information are inherently uncertain and, though considered reasonable by the management of Baker Hughes as of the date of its preparation, are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking financial information, including, among other things, the following: the ultimate timing, outcome and results of integrating the operations of Halliburton and Baker Hughes and the degree to which Halliburton’s operating efficiencies are applied to Baker Hughes products and services; changes in the demand for or price of oil and/or natural gas; changes in government regulations and regulatory requirements, particularly those related to offshore oil and natural gas exploration, radioactive sources, explosives, chemicals, hydraulic fracturing services and climate-related initiatives; impairment of oil and natural gas properties; and structural changes in the oil and natural gas industry, and other matters described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 41 of this joint proxy statement/prospectus, “Risk Factors” beginning on page 32 of this joint proxy statement/prospectus and Part I, Item 1A in the Baker Hughes’s 2013 Annual Report on Form 10-K. Accordingly, there can be no assurance that the forward-looking results are indicative of the future performance of Baker Hughes or Halliburton, or that actual results will not differ materially from those presented in the forward-looking financial information. Inclusion of the forward-looking financial information in this joint proxy statement/prospectus should not be regarded as a representation by any person that the results contained in the forward-looking financial information will be achieved.

 

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Baker Hughes does not intend to update or otherwise revise the forward-looking financial information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error. Furthermore, Baker Hughes does not intend to update or revise the forward-looking financial information to reflect changes in general economic or industry conditions.

The information concerning forward-looking financial information provided by Baker Hughes is not included in this joint proxy statement/prospectus in order to induce any stockholder to vote in favor of the merger agreement.

Accounting Treatment

The acquisition of Baker Hughes common stock by Halliburton in the merger will be accounted for in accordance with the acquisition method of accounting and the regulations of the SEC. This means that the assets and liabilities of Baker Hughes will be recorded, as of the completion of the merger, at their fair values and consolidated with those of Halliburton. This will result in recording an amount for goodwill, which represents the excess of the purchase price over the fair value of the identifiable net assets of Baker Hughes. Financial statements of Halliburton issued after the merger will reflect only the operations of Baker Hughes’s business after the merger and will not be restated retroactively to reflect the historical financial position or results of operations of Baker Hughes.

All unaudited pro forma combined financial information contained in this joint proxy statement/prospectus was prepared using the acquisition method of accounting for business combinations. The final allocation of the purchase price will be determined after the merger is completed and after completion of an analysis to determine the fair value of the assets and liabilities of Baker Hughes’s business. Accordingly, the final purchase accounting adjustments may be materially different from the unaudited pro forma adjustments. Any decrease in the fair value of the assets or increase in the fair value of the liabilities of Baker Hughes’s business as compared to the unaudited pro forma combined financial information included in this joint proxy statement/prospectus will have the effect of increasing the amount of recorded goodwill. An increase or decrease in the share price of Halliburton would have the effect of increasing or decreasing goodwill, as the case may be. The goodwill amount will not be affected by a change in the Baker Hughes share price.

Material United States Federal Income Tax Consequences of the Transaction

The following discussion, subject to the limitations and qualifications described herein, constitutes the opinion of Baker Botts L.L.P. and Davis Polk & Wardwell LLP as to the material United States federal income tax consequences of the merger applicable to United States holders (as defined below) of Baker Hughes common stock that receive Halliburton common stock and cash in the transaction, to the extent such discussion sets forth statements of United States federal income tax law or legal conclusions with respect thereto. Baker Botts L.L.P. and Davis Polk & Wardwell LLP have advised Halliburton and Baker Hughes, respectively, that the transaction will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and that each of Halliburton and Baker Hughes will be “a party to the reorganization” within the meaning of Section 368(b) of the Internal Revenue Code.

The tax opinions of Baker Botts L.L.P. and Davis Polk & Wardwell LLP are based, in part, on representations, in form and substance reasonably acceptable to Baker Botts L.L.P. and Davis Polk & Wardwell LLP, made by Halliburton and Baker Hughes with respect to factual matters related to the requirements of the tax law relevant to rendering the preceding opinions, and on customary factual assumptions set forth in their opinions attached as Exhibits 8.1 and 8.2 to the registration statement of which this joint proxy statement/prospectus forms a part, all of which must be consistent with the state of facts existing as of the effective time of the merger. It is a condition to the obligations of Halliburton and Baker Hughes to complete the merger that each shall have received confirmation, dated as of the closing date of the merger, of the opinion of its respective tax

 

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counsel contained in this paragraph, which opinion similarly will be based on certain factual representations and assumptions. If any of the factual representations or assumptions on which the opinions described above are based are inaccurate as of the effective time of the merger, the tax consequences to United States holders could differ materially from those described below. Although the merger agreement allows Halliburton and Baker Hughes to waive the opinion requirements as a condition to closing, neither Halliburton nor Baker Hughes currently anticipates doing so. If either Halliburton or Baker Hughes does waive these conditions, you will be informed of this decision prior to being asked to vote on the transaction.

The above-described opinions of counsel represent the best legal judgment of counsel to Halliburton and counsel to Baker Hughes. These opinions and the discussion set forth herein are not binding on the Internal Revenue Service or any court. No ruling will be sought from the Internal Revenue Service with respect to the tax consequences of the transaction and no assurance can be given that the Internal Revenue Service would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.

The following discussion is based upon the Internal Revenue Code, United States Treasury regulations, judicial authorities, published positions of the Internal Revenue Service, and other applicable authorities, all as currently in effect on the date of this joint proxy statement/prospectus and all of which are subject to differing interpretations and change (possibly with retroactive effect). Any such change could render the conclusions stated herein invalid. This discussion is limited to holders that hold their shares of Baker Hughes common stock as capital assets for United States federal income tax purposes (generally, assets held for investment). This discussion does not address all of the tax consequences that may be relevant to a particular Baker Hughes stockholder or to Baker Hughes stockholders that are subject to special treatment under United States federal income tax laws including, but not limited to, financial institutions, tax-exempt organizations, insurance companies, regulated investment companies, partnerships or other pass-through entities, broker-dealers, traders in securities who elect the mark to market method of accounting for their securities, Baker Hughes stockholders that hold their shares of Baker Hughes common stock as part of a “straddle,” “hedge,” “conversion transaction” or other integrated transaction, Baker Hughes stockholders who acquired their shares of Baker Hughes common stock pursuant to the exercise of employee stock options or otherwise in connection with the performance of services, United States expatriates, Baker Hughes stockholders who have a functional currency other than the United States dollar, Baker Hughes stockholders liable for the alternative minimum tax and Baker Hughes stockholders who exercise appraisal rights. This discussion also does not address the tax consequences to Baker Hughes, or to Baker Hughes stockholders that own 5% or more of Baker Hughes common stock or that are affiliates of Baker Hughes. In addition, this discussion does not address other United States federal taxes (such as gift or estate taxes or alternative minimum taxes), the tax consequences of the transaction under state, local or foreign tax laws, certain tax reporting requirements that may be applicable with respect to the transaction or the Medicare tax on “net investment income.”

For purposes of this discussion, the term “United States holder” means a beneficial owner of Baker Hughes common stock that is (i) a citizen or resident of the United States, (ii) a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized under the laws of the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income tax regardless of its source and (iv) a trust if such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes or if (A) a U.S. court can exercise primary supervision over the trust’s administration and (B) one or more U.S. persons have the authority to control all substantial decisions of the trust. A “non-United States holder” is a holder of shares of Baker Hughes common stock other than a United States holder or an entity or arrangement treated as a partnership for United States federal income tax purposes.

If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a Baker Hughes stockholder, the United States federal income tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A partner in a partnership holding Baker Hughes common stock should consult its tax advisors with respect to the tax consequences of the transaction.

 

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Baker Hughes stockholders are urged to consult their tax advisors as to the particular United States federal income tax consequences of the transaction to them, as well as any tax consequences arising under any state, local and non-United States tax laws or any other United States federal tax laws.

Based on and subject to the foregoing, the following material United States federal income tax consequences will result from the transaction:

 

•

A United States holder generally will recognize gain (but not loss), determined separately for each identifiable block of shares of Baker Hughes common stock (generally, Baker Hughes common stock acquired at the same cost in a single transaction) that is exchanged in the transaction, in an amount equal to the lesser of (i) the amount of cash received in the transaction with respect to such block, excluding any cash received in lieu of a fractional share of Halliburton common stock (which is discussed below), and (ii) the excess, if any, of (a) the sum of the amount of such cash and the fair market value of the Halliburton common stock received in the transaction with respect to such block over (b) the United States holder’s tax basis in its shares of Baker Hughes common stock in such block. Any gain recognized generally will be capital gain, and will be long-term capital gain if, as of the date of the merger, the shares of Baker Hughes common stock exchanged in the transaction were held for more than one year, unless the receipt of cash has the effect of a distribution of a dividend under the provisions of the Internal Revenue Code, in which case such gain will be treated as a dividend to the extent of such United States holder’s ratable share of the undistributed earnings and profits as determined for U.S. federal income tax purposes. United States holders should consult their tax advisors as to the possibility that all or a portion of any cash received in exchange for their shares of Baker Hughes common stock will be treated as a dividend.

 

•

A United States holder generally will have an aggregate tax basis in the shares of Halliburton common stock received in the transaction (including any fractional share of Halliburton common stock deemed received and redeemed for cash, as discussed below) equal to the United States holder’s aggregate tax basis in its shares of Baker Hughes common stock exchanged in the transaction, reduced by the amount of cash received in the transaction (other than cash received in lieu of a fractional share of Halliburton common stock) and increased by the amount of gain recognized by the United States holder (including, but not limited to, any portion of such gain that is treated as a dividend, but excluding any gain recognized with respect to cash received in lieu of a fractional share of Halliburton common stock) in the transaction.

 

•

The holding period of the shares of Halliburton common stock received by a United States holder in the transaction (including any fractional share of Halliburton common stock deemed received and redeemed for cash, as discussed below) will include the holding period of the shares of Baker Hughes common stock exchanged in the transaction.

 

•

Cash received by a United States holder in lieu of a fractional share of Halliburton common stock in the transaction will be treated as if such fractional share had been issued in the transaction and then redeemed by Halliburton. Subject to the discussion above regarding possible dividend treatment, a United States holder generally will recognize capital gain or loss with respect to cash received in lieu of a fractional share, measured by the difference, if any, between the amount of cash received and the tax basis in such fractional share (determined as described above). Any gain or loss recognized generally will be long-term capital gain or loss if, as of the date of the merger, the shares of Baker Hughes common stock exchanged in the transaction were held for more than one year. The deductibility of capital losses is subject to limitations.

 

•

Subject to the discussion above regarding possible dividend treatment, a non-United States holder generally will not be subject to United States federal income tax on gain, if any, realized on the exchange of shares of Baker Hughes in the transaction, unless (A) such gain is effectively connected with the conduct by the non-United States holder of a trade or business within the United States (and, if a tax treaty applies, is attributable to a permanent establishment or fixed place of business maintained

 

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by the non-United States holder in the United States); or (B) in the case of a non-United States holder that is an individual, such individual is present in the United States for 183 days or more during the taxable year in which the gain is recognized and certain other conditions are met.

United States and non-United States holders are urged to consult their tax advisors with respect to the determination of gain recognized on the exchange of their shares of Baker Hughes common stock (as well as their basis in the shares of Halliburton common stock received in the transaction), taking into account their particular circumstances.

Cash payments received by a United States holder or non-United States holder pursuant to the transaction may be subject to information reporting, and may be subject to backup withholding at the applicable rate (currently 28%) if the United States holder, non-United States holder or other payee fails to provide a valid taxpayer identification number and comply with certain certification procedures or otherwise establish an exemption from backup withholding. Backup withholding is not an additional United States federal income tax. Rather, any amounts withheld may be credited against the United States holder’s or non-United States holder’s United States federal income tax liability, and if backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the Internal Revenue Service.

The tax consequences of the transaction to a particular Baker Hughes stockholder will depend on the stockholder’s individual circumstances. Baker Hughes stockholders are strongly encouraged to consult their tax advisors regarding the specific tax consequences of the transaction to them, including tax return reporting requirements and the applicability of federal, state, local and non-United States tax laws.

Regulatory Matters Relating to the Merger

General

Under the terms of the merger agreement, the merger cannot be completed until the waiting period applicable to the consummation of the merger under the HSR Act has expired or been terminated and all other specified required approvals have been obtained or any applicable waiting period thereunder has expired or been terminated.

Under the HSR Act and the rules promulgated thereunder by the FTC, the merger cannot be completed until each of Halliburton and Baker Hughes has filed a notification and report form with the FTC and the Antitrust Division of the DOJ under the HSR Act and the applicable waiting period has expired or been terminated. Each of Halliburton and Baker Hughes filed an initial notification and report form on December 8, 2014. Halliburton withdrew its filing on January 7, 2015 and refiled on January 9, 2015 in order to provide the FTC and the DOJ with an additional 30-day period to review the filings. On February 9, 2015, the DOJ issued a Second Request. The parties also have been informed that the DOJ will conduct the merger review.

At any time before or after consummation of the merger, notwithstanding the termination of the waiting period under the HSR Act, the Antitrust Division of the DOJ or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Halliburton or Baker Hughes. At any time before or after the completion of the merger, and notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Halliburton or Baker Hughes. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

The merger agreement provides that the merger is also subject to approval by governmental authorities in other jurisdictions under the antitrust/competition laws of those jurisdictions. Under the merger agreement the

 

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parties’ obligations to complete the merger are conditioned on the receipt or making, as the case may be, of all antitrust/competition law approvals or filings required by the laws of the European Union, Australia, Brazil, Canada, China, India, Kazakhstan, Mexico, Russia and Saudi Arabia, to the extent filings are required in any or all of these jurisdictions.

There can be no assurance that all of the regulatory approvals described above will be sought or obtained and, if obtained, there can be no assurance as to the timing of any approvals, the ability of Halliburton or Baker Hughes to obtain the approvals on satisfactory terms or the absence of any litigation challenging such approvals. There can also be no assurance that the DOJ, the FTC or any other governmental entity or any private party will not attempt to challenge the merger on antitrust grounds and, if such a challenge is made, there can be no assurance as to its result.

Under the terms of the merger agreement, each of Halliburton and Baker Hughes has agreed to cooperate and use its reasonable best efforts to take or cause to be taken all actions that are necessary, proper or advisable to consummate and make effective the merger and the other transactions contemplated by the merger agreement as promptly as practicable, including:

 

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use its reasonable best efforts to satisfy the conditions to closing;

 

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use its reasonable best efforts to obtain all necessary actions or nonactions, waivers, authorizations, expirations or terminations of waiting periods, clearances, consents and approvals from governmental entities and the making of all necessary registrations and filings and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental entity;

 

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use its reasonable best efforts to obtain all necessary consents, approvals or waivers from third parties;

 

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use its reasonable best efforts to defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging the merger agreement or the consummation of the transactions contemplated thereby;

 

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make its respective required filings (and filings considered by Halliburton to be advisable after consulting with, and considering in good faith the views of, Baker Hughes) under the HSR Act, the EC Merger Regulation and any other regulatory laws, and thereafter to promptly make any other required submissions under the HSR Act or other such laws;

 

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use its reasonable best efforts to respond to and comply promptly with and expeditiously achieve substantial compliance with any request for information regarding the merger or any such filings for any governmental entity charged with enforcing, applying, administering, or investigating any regulatory law;

 

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promptly notify the other party of any communication concerning the merger from any governmental entity (subject to appropriate confidentiality agreements);

 

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use its reasonable best efforts to cooperate with the other party to determine the required regulatory filings and timely make such filings;

 

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consult with the other party before agreeing to participate in a meeting with any governmental entity relating to any filings or investigations concerning the merger agreement and invite the other party to attend such meetings (subject to appropriate confidentiality agreements);

 

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promptly furnish the other party with drafts of any submission to a governmental entity and provide any necessary information and reasonable assistance as may be requested in connection with the preparation of necessary filings (subject to appropriate confidentiality agreements); and

 

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deliver to the other party’s outside counsel complete copies of all documents provided to any governmental entity as part of any filing (subject to appropriate confidentiality agreements).

 

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Halliburton has agreed to take any action, including with respect to any request that assets, businesses or product lines be divested or held separate or subject to conduct remedies, limitations or other actions, as may be necessary to resolve such objections, if any, that the FTC, the DOJ, the European Commission, state antitrust enforcement authorities or competition authorities of any other nation or other jurisdiction, may assert in connection with obtaining antitrust clearance for the merger so as to enable the closing of the merger to occur as soon as reasonably possible (and in any event no later than the outside date). Halliburton, however, is not required (although it could so choose) to divest or hold separate, or agree to any conduct remedy or similar antitrust action regarding, any assets, businesses or product lines if such assets, businesses or product lines accounted for, in the aggregate, more than the detriment limit. If reaching agreement with the antitrust authorities would require Halliburton to divest or take other action regarding assets, businesses or product lines in excess of $7.5 billion of 2013 revenue, Halliburton has the option to either divest or take other action with respect to the larger amount or continue to attempt to obtain approval of the antitrust authorities until the outside date. In addition, Halliburton would be required to pay Baker Hughes an antitrust termination fee of $3.5 billion if the merger agreement is terminated because:

 

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there is an antitrust-related order or injunction that prevents the closing and that has become final and nonappealable;

 

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Halliburton materially breaches its antitrust-related covenants which breach results in the antitrust closing condition being incapable of being satisfied; or

 

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the merger is not completed by the outside date and as of such termination the failure to obtain an antitrust approval or an antitrust-related order or injunction prevents closing but all other conditions to Halliburton’s obligation to close have been satisfied (other than any such conditions which by their nature cannot be satisfied until the closing date but subject to such conditions being capable of being satisfied if the closing date were the date of termination).

Halliburton is entitled to direct the defense to any antitrust investigation or litigation, but must consult with and consider in good faith the view of Baker Hughes. Halliburton has the right to litigate or appeal any proposed antitrust remedial action. However, if such proceedings conclude prior to the outside date with an order restricting the merger or if no order has been issued in such proceedings prior to the outside date, then Halliburton must take such actions as are necessary to achieve antitrust approval prior to the outside date, except that Halliburton is not required to take any action that would exceed the detriment limit. Baker Hughes is required to take any actions requested by Halliburton to obtain any required Regulatory Clearances but Baker Hughes is not required to agree to any divestiture or other remedy unless conditioned on the merger closing.

Each of Halliburton and Baker Hughes currently intends to submit the merger proposals to its respective stockholders at a special meeting as noted above in “Information About the Halliburton Special Meeting and Vote” beginning on page 44 and “Information About the Baker Hughes Special Meeting and Vote” beginning on page 48. It is possible that a governmental agency will not have approved the merger by the date of such special meetings, which could delay or prevent completion of the merger for a significant period of time after Halliburton stockholders and Baker Hughes stockholders have approved the proposals relating to the merger. Any delay in the completion of the merger could diminish the anticipated benefits of the merger or result in additional transaction costs, loss of revenue or other effects associated with uncertainty surrounding the transaction. In addition, it is possible that, among other things, a governmental agency could condition its approval of the merger upon Halliburton and Baker Hughes entering into an agreement to divest a portion of their combined businesses or assets, or could restrict the operations of the combined businesses in accordance with specified business conduct rules. See “Risk Factors” beginning on page 32. A governmental agency also could impose significant additional costs on the business of the combined company. Acceptance of any such conditions could diminish the benefits of the merger to the combined company and result in additional costs, loss of revenue or other effects. Alternatively, rejection of such conditions could result in Halliburton and Baker Hughes litigating with a governmental entity, which could delay the merger or cause the merger to be abandoned.

 

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No additional stockholder approval is expected to be required for any decision by Halliburton or Baker Hughes after the special meetings are held relating to any divestitures or other terms and conditions necessary to resolve any regulatory objections to the merger and, possibly, to proceed with consummation of the merger.

As more fully described in “The Merger Agreement—Termination of the Merger Agreement and Termination Fees” beginning on page 147, the merger agreement may be terminated by Halliburton or Baker Hughes if the merger is not consummated on or before the outside date (initially October 30, 2015 but subject to extension as described in such section), and the party seeking to terminate the merger agreement has not breached its obligations under the merger agreement in a manner that proximately caused the failure of the merger to be completed on or before the outside date, except that if the only mutual closing conditions under the merger agreement that have not been satisfied by such date are those relating to approvals under antitrust and competition laws and/or absence of injunctions under such laws, either Halliburton or Baker Hughes may unilaterally extend the outside date on one or more occasions until no later than April 30, 2016.

Appraisal Rights

Halliburton stockholders are not entitled to appraisal rights in connection with the merger. See “Information About the Halliburton Special Meeting and Vote—Appraisal Rights” beginning on page 45 for more detail.

Under Delaware law, Baker Hughes stockholders have appraisal rights in connection with the merger. Therefore, a stockholder of Baker Hughes may elect to be paid cash for the fair value of such stockholder’s shares as determined by the Delaware Court of Chancery and in accordance with the procedures set forth in Section 262 of the DGCL. See “Appraisal Rights of Baker Hughes Stockholders” beginning on page 169 for more detail.

Federal Securities Laws Consequences; Stock Transfer Restrictions

The shares of Halliburton common stock to be issued in connection with the merger will be freely transferable under the Securities Act and the Exchange Act except for shares issued to any stockholder who may be deemed to be an “affiliate” of Halliburton for purposes of Rule 144 under the Securities Act. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or under the common control with Halliburton and may include the executive officers, directors and significant stockholders of Halliburton. This joint proxy statement/prospectus does not cover resales of Halliburton common stock received by any person upon the completion of the merger, and no person is authorized to make any use of this joint proxy statement/prospectus in connection with any resale.

Stock Exchange Listing; Delisting and Deregistration of Baker Hughes’s Common Stock; Shares to be Issued in the Merger

It is a condition to the merger that the shares of Halliburton common stock issuable pursuant to the merger be approved for listing on the NYSE, subject to official notice of issuance. Shares of Halliburton common stock will continue to be traded on the NYSE under the symbol “HAL” immediately following the completion of the merger. When the merger is completed, Baker Hughes common stock will cease to be listed on the NYSE and the SIX Swiss Exchange and its shares will be deregistered under the Exchange Act.

Based on the exchange ratio contemplated by the merger agreement and the number of shares of Baker Hughes common stock and Baker Hughes equity-based awards as of February 12, 2015, a total of approximately 490 million shares of Halliburton common stock will be issued in the merger for the outstanding shares of Baker Hughes, which will represent approximately 37% of the total Halliburton common stock outstanding immediately following the merger.

After the merger, Halliburton stockholders will continue to own their existing shares of Halliburton common stock. Accordingly, Halliburton stockholders will hold the same number of shares of Halliburton

 

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common stock that they held immediately prior to the merger. However, because Halliburton will be issuing new shares of Halliburton common stock to Baker Hughes stockholders in the merger, each outstanding share of Halliburton common stock immediately prior to the merger will represent a smaller percentage of the total number of shares of Halliburton common stock outstanding after the merger. It is expected that Halliburton stockholders before the merger will hold approximately 63% of the total Halliburton common stock outstanding immediately following completion of the merger.

Litigation Relating to the Merger

Following the announcement of the merger, six putative class action complaints challenging the merger were filed on behalf of purported Baker Hughes stockholders in the Court of Chancery of the State of Delaware. The complaints are captioned: Gary R. Molenda v. Baker Hughes, Inc., et al., Case No. 10390-CB; Booth Family Trust v. Baker Hughes, Inc., et al., Case No. 10404-CB; New Jersey Building Laborers Annuity Fund v. Baker Hughes, Inc., et al., Case No. 10413-CB; Iron Workers Mid-South Persion Fund v. Baker Hughes, Inc., et al., Case No. 10448-CB; James Rice v. Baker Hughes, Inc., et al., Case No. 10414-CB; and Annette Shipp v. Martin S. Craighead, et al., Case No. 10501-CB. On January 23, 2015, the Court of Chancery consolidated the Delaware actions under the caption In re Baker Hughes Inc. Stockholders Litigation, Consolidated C.A. No. 10390-CB. Pursuant to the Court’s consolidation order, plaintiffs filed a consolidated complaint on February 4, 2015 (the “Consolidated Complaint”). A seventh putative class action challenging the merger was filed on behalf of purported Baker Hughes stockholders in the U.S. District Court for the Southern District of Texas. The complaint is captioned Marc Rovner v. Baker Hughes Inc., et al., Cause No. 4:14-cv-03416.

These complaints name as defendants Baker Hughes, the members of the Baker Hughes Board, Halliburton and Merger Sub. The complaints assert that the members of the Baker Hughes Board breached their fiduciary duties to Baker Hughes stockholders during the merger negotiations and by entering into the merger agreement and approving the merger, and that Baker Hughes, Halliburton and Merger Sub aided and abetted such breaches of fiduciary duties. The complaints allege, among other things, that the merger consideration undervalues Baker Hughes, that the process leading up to the merger was flawed, that the directors engaged in self-dealing and that certain provisions of the merger agreement improperly favor Halliburton and Merger Sub and preclude or impede third parties from submitting potentially superior proposals and that the Form S-4 fails to disclose material information or includes misleading disclosures concerning the proposed merger. The complaints seek, among other relief, injunctive relief enjoining the merger, rescission of the merger agreement, a directive to Baker Hughes directors to execute their fiduciary duties and obtain a transaction in the best interest of stockholders, a directive to defendants to account for all damages caused by them and account for all profits and any special benefits obtained as a result of their breaches of their fiduciary duties, compensation for certain unspecified damages and reimbursement of costs.

Defendants filed motions to dismiss, or in the alternative, to stay the Texas action on February 13, 2015, and plaintiff is expected to file a response on March 6, 2015.

The defendants believe that the claims asserted against them in the lawsuits are without merit.

 

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ADDITIONAL INTERESTS OF BAKER HUGHES’S

DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

In considering the recommendation of the Baker Hughes Board with respect to the merger, Baker Hughes stockholders should be aware that executive officers and non-employee directors of Baker Hughes have certain interests in the merger that may be different from, or in addition to, the interests of Baker Hughes stockholders generally. These interests include the following:

Leadership of the Combined Company

As of the effective time of the merger, the board of directors of the combined company will be composed of the members of the Halliburton Board (currently thirteen members) and three Baker Hughes designees, selected by mutual agreement between the companies and who must be independent with respect to Halliburton. A transition team comprised of senior executives from both companies is leading the integration. At the first annual meeting of Halliburton following the closing of the merger, Halliburton will nominate each of the three Baker Hughes designees and use its reasonable efforts to cause each of them to be elected to the Halliburton Board.

The thirteen current directors of Halliburton are Alan M. Bennett, James R. Boyd, Milton Carroll, Nance K. Dicciani, Murry S. Gerber, José C. Grubisich, Abdallah S. Jum’ah, Abdulaziz Fahd Al Kayyal, David J. Lesar, Robert A. Malone, J. Landis Martin, Jeffrey A. Miller and Debra L. Reed. As of the date of this joint proxy statement/prospectus, the three Baker Hughes designees have not been identified.

David J. Lesar will continue to serve as Halliburton’s Chairman and Chief Executive Officer of Halliburton.

Stock Options and Other Equity and Long-Term Incentive Awards

If the merger is consummated, any then outstanding equity and long-term incentive awards (including stock options, restricted stock awards, restricted stock unit awards and performance unit awards) granted by Baker Hughes to non-employee directors and executive officers would be treated as discussed below under “The Merger Agreement—Treatment of Baker Hughes Equity Incentive Awards.”

Non-Employee Directors

For illustrative purposes, the table below sets forth the estimated values of the accelerated vesting of the non-employee directors’ stock options and restricted stock units if the effective time of the merger had occurred on December 31, 2014. The values were calculated by assuming a price per share of Baker Hughes common stock of $64.40, which equals the average closing price of a share over the five business day period following the first public announcement of the merger.

 

Director		Equity Award Acceleration ($)
J. Larry Nichols			227,263
Larry D. Brady			227,263
Gregory D. Brenneman			92,255
Clarence P. Cazalot, Jr.			227,263
William H. Easter III			92,255
Lynn L. Elsenhans			225,653
Anthony G. Fernandes			227,263
Claire W. Gargalli			227,263
Pierre H. Jungels			227,263
James A. Lash			227,263
James W. Stewart			227,263
Charles L. Watson			227,263

 

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Executive Officers

The vesting of the equity awards granted prior to the date of the merger agreement and held by the executive officers at the effective time of the merger would accelerate immediately at the effective time of the merger. For the estimated values of such “single trigger” accelerated vesting, see the “Equity” column of the table below under “—Golden Parachute Compensation.”

The vesting of the equity awards granted after the date of the merger agreement and held by the executive officers at the effective time of the merger would accelerate on a termination of employment by Baker Hughes (or its successor) without “cause” or by the executive officer for “good reason” during the 12-month period following the effective time of the merger. For the estimated values of such “double trigger” accelerated vesting, see footnote 2 to the table below under “—Golden Parachute Compensation.”

Deferred Compensation—“Single Trigger” Vesting

If the merger is consummated, certain executive officers would be entitled to accelerated vesting of their nonqualified deferred compensation benefits under Baker Hughes’s Supplemental Retirement Plan (the “SRP”) at the effective time of the merger. For the estimated values of such accelerated vesting, see the