SAN ANTONIO – In a Texas-sized mega deal, oil field services giant Halliburton announced Monday it would acquire rival Baker Hughes in a $34.6 billion cash and stock deal.
While both companies are headquartered in Houston, each has a major presence working the Eagle Ford Shale.
Halliburton set up operations on the San Antonio's South Side, while Baker Hughes has a facility in south Bexar County.
"Basically, the acquisition has created a huge competitive advantage for Halliburton," said Deli Yang, professor of international business at Trinity University. "It means the company will be able to broaden product and services in the U.S. and also the international market."
The acquisition will allow the companies to share technologies and cut costs by eliminating redundancies. The combined company would have 136,000 employees.
Halliburton Chairman and CEO Dave Lesar said the deal will mean synergy-related cost savings of nearly $2 billion per year.
The merger comes as consumers are paying the lowest gas prices in four years. Global crude prices have tumbled $30 per barrel since June. As a result, drilling has slowed, meaning less work for Halliburton and Baker Hughes, who manage the fields.
The deal is far from done, however.
"It is going to see many challenges in front of them in the future," Yang said. "The immediate one is regulatory approval."
Anti-trust concerns are seen as a hurdle.
Halliburton said it was willing to sell some of its operations if necessary to win approval.
If regulators and shareholders sign off on the deal, it would be done by the latter half of next year.