Baker International Corp. and Hughes Tool Co. spent the weekend and all day Monday in meetings to try to salvage the proposed $1.2-billion merger of the two major oil service companies--a deal that was nearly derailed last week.
“There were some discussions going on Friday and over the weekend,” Hughes Director Clinton Morris said.
And the meetings continued Monday, Baker Vice President Ronald Turner said, adding: “It was a day in which progress was made.” But he declined to be more explicit about what was discussed or accomplished. He said he expected that the talks will stretch until Wednesday afternoon, when Hughes has scheduled a long-delayed meeting for its shareholders to vote on the merger.
Negotiations fell apart last Wednesday when Hughes threatened to scuttle the merger plan, complaining that Baker would not agree to alternative terms it had proposed to avoid certain Justice Department requirements that Hughes called “unreasonable.” Just 15 minutes after Hughes made that announcement, Baker filed a $1-billion lawsuit in state court in Houston charging Hughes with breach of contract.
The next morning, Hughes officials--in a last-minute change of heart--invited Baker back to the bargaining table.
The stalemate hinges on the Justice Department’s demand for the sale of certain Baker drill bit and pump business that would overlap similar Hughes businesses and thus create an illegal monopoly after the two companies merge.
Hughes wants to obtain the Justice Department’s approval of a purchaser for the assets targeted for divestiture before the merger, while Baker is willing to go along with a Justice Department-drafted plan that sets deadlines for sale of the assets after the merger is consummated. The Justice Department plan also calls for additional Baker assets to be offered if necessary to complete the sale.
Morris said Houston-based Hughes hopes that it will be able to reach a compromise that will “fit our view of the best route to go with” while also satisfying Baker, which last week moved its corporate headquarters from Orange to Houston, and the Justice Department.