Baker International's chief executive said Wednesday that he expects the Justice Department to deliver by week's end the first draft of a settlement agreement needed to complete Baker's $1.2-billion merger with Houston-based Hughes Tool Co.
Baker President James D. Woods said he believes that the proposal, drafted in negotiations with the Justice Department's antitrust division, will call for Baker to sell its electrical submersible pump business and the domestic portion of its tricone drilling bit business, which together currently represent about $38 million of Baker's $1.25 billion in annual sales.
Baker officials would not comment Wednesday on how much money they expect to get from the sale of the two business units, although previously they had estimated it would be about $38 million--the same as the two units' combined sales.
Justice Department spokesman Mark Sheehan declined comment Wednesday on the progress of negotiations over the merger, which would result in a $2-billion-a-year company to be called Baker Hughes and to be headquartered in Houston with E.H. Clark Jr., Baker's former chief executive, as chairman. Woods would serve as chief executive of the merged companies.
Essentially, Baker already has agreed verbally to the conditions imposed by the Justice Department, Woods said. But he added that details, such as when the sales must close, still are being negotiated.
Woods said he expects to receive a letter of intent next week from a potential buyer of Baker's electrical submersible pump line.
Meanwhile, 10 to 15 companies have shown interest in Baker's larger tricone drilling bit business, Woods said. He said he expects to begin serious negotiations with them in the next week. The tricone drill operation accounts for about 90% of Baker's domestic drill bit business. A tricone bit is an oil well drill bit that utilizes three cone-shaped grinding heads to bore through the earth.
The Justice Department's complaint about anti-competitive aspects of the proposed merger of Baker and Hughes, two giants in the financially distressed oil services industry, forced both companies to postpone special shareholder meetings they had called late last month to vote on the corporate marriage.
The meetings were postponed until Feb. 25. Woods said he hopes that the two companies and the Justice Department by then will have reached an accord that "will enable us to move on with the consolidations and efficiencies of the merger."
He said his staff figures that delay of the merger is costing the companies $250,000 to $275,000 a day.