#$bhi

[thedealnewsroom]

DOJ disco - two moves Halliburton and Baker Hughes can now make

After the DOJ veto, the prospect of salvaging the $35 billion deal hangs in the balance.

by Claire Poole

Now that the Department of Justice has sued to block Halliburton Co.'s $35 billion acquisition of Baker Hughes Inc. as early as this week, pundits are trying to prognosticate how it will all play out.

Kurt Hallead is one of them. The longtime oilfield services analyst - who currently hangs his hat at RBC Capital Markets Inc. - thinks the situation could play out one of two ways. One is that Halliburton and Baker Hughes agree to extend the merger deadline - which is set to expire April 30 - giving Halliburton more time to find the appropriate mix of divestitures to satisfy regulators. (It's already submitted three different tranches of offerings over the last 12 months, the most recent in January). That could lead to the deal still closing this year. If that were the happen, he thinks that Baker Hughes would be valued at $57 per share, or 40% higher than its current stock price.

The second scenario is that Halliburton fails to gain regulatory approval or it decides to end the transaction. If that happens, Halliburton would have to stomach a $3.5 billion breakup fee. The news wouldn't be good for Baker Hughes, either. It would trade down to the $30 to $35 per share range absent a "new" merger offer from a different entity, Hallead estimates. Its stock closed at $39.36 per share on Tuesday, a 5% drop from Monday.

Who could the new acquirer be? General Electric Co. has certainly made its intentions known that it wants to do another oil and gas acquisition - and is probably one of the few with the wherewithal to do it (it was already said to be negotiating with Halliburton to buy some of its assets to allow the Baker Hughes deal to go through). But whoever the buyer is, the deal won't be done at Halliburton's offer of $78.62 per share.

Some tongues have wagged that Baker Hughes could turn from target to acquirer, picking up Weatherford International plc, which had also been angling to buy some of Halliburton's assets.

Whether the DOJ blocks the transaction or Halliburton rejects additional demands, Halliburton will most certainly lodge a legal challenge. And then the real fun begins.

[thedealnewsroom]

Could GE see value in all of Baker rather than pieces?

Halliburton is offering more divestitures for Baker to win over the DOJ.

by Scott Stuart

Halliburton Co. (HAL) is attempting to work its $22 billion acquisition of Baker Hughes Inc. (BHI) through the regulatory process. But what if its hoped-for solution -- General Electric Co. (GE) as the buyer of most required divestitures -- has an end game of its own?

The Baker Hughes transaction still needs approval in the U.S. from the Department of Justice's antitrust division. A deadline for that review expired in December, without an action by the DOJ. The U.S. antitrust authority said it did not think the proposed divestitures presented by Halliburton were enough to address competition concerns.

The lack of regulatory clarity in U.S. isn't a huge problem so far because the deadline in a parallel competition review by the European Commission is currently May 26.

Halliburton reportedly has again sweetened the divestiture package offered to get the transaction done. The companies previously have offered certain drilling business of Halliburton and completion business of Baker Hughes. The merger agreement requires that Halliburton offer assets representing up to $7.5 billion in revenues. Some analysts have put the current package at a little over $5 billion in revenues prior to additions to assuage regulators.

In December, Halliburton had said that progress was being made with the divestitures with respect to the first tranche, which is the drilling services and drill bits assets, with negotiations in final stages. And a sale of completion assets were on an expedited sales track. That was before the DOJ process went off a defined timeline and the EC review was pushed into an extended phase.

New assets in the divestiture mix are meant to fill out the completion business package, according to a Bloomberg report.

General Electric Co. is considered the likely buyer of the bulk of the assets on the block, although Halliburton has previously said regulators have not indicated that a single buyer was a requirement for satisfying antitrust concerns.

As assets are added to the package there is some concern that a cap in the merger agreement limiting the amount of divestitures Halliburton must accept could be surpassed, which would put the deal at risk. Halliburton must pay a $3.5 billion termination fee if it cannot get the merger done because of antitrust objections.

There are some concerns that Halliburton can't get a desired price for the divestiture package given the current state of oil pricing and the energy development market.

Some risk arbitrageurs think the divestiture price is less an issue than the willingness of the DOJ to allow the merger to proceed under any circumstances.

Halliburton thought it could raise debt and buy back shares following the transaction, in which the buyer is paying $19 in cash and 1.12 of a Halliburton share. In the current market, that scenario is not as viable, which raises concerns if Halliburton is not getting the price they expected for divested assets, a sell-side analyst said. GE would benefit more from buying all of Baker Hughes than the assets in the divestiture package, which raises a question about how motivated GE would be to buy the assets if the merger would otherwise fail, he said.

However, a source close to GE said the company is waiting to see what package the DOJ will ultimately find acceptable and is not mulling a bid for all of Baker Hughes.

The deal spread Tuesday was $9.50, or 22%. If the close date was May 31, that spread represented an annualized return of roughly 70%.

[jimcramer]

Don't look now, but we're back in '87

Nothing like pharmaceutical stocks trading with fuel. I can't think of anything more correlative.

Laugh line.

You should laugh, except I now think that if you want a surefire trade, you short the drug stocks on a big oil inventory number or a bad -- meaning too many --Baker Hughes rig count.

It's almost as good as shorting the restaurants and retailers, the principal beneficiaries of low fuel costs.

Why does this happen? Why can it happen? First, the machines have seen the pattern and it stays the pattern until it doesn't work.

Second, there's just no volume anymore. You can knock over the stock of Wal-Mart, a $214 billion company and perhaps the company most levered to lower gasoline, with a feather.

What I wish would happen would be that the companies see this pattern and they stand underneath and buy on these ridiculous days.

When companies first started doing big buybacks, they were done post the 1987 crash -- I used to talk to companies I owned shares in about doing them because I explained how the futures had overwhelmed the cash market.

Over time, though, buyers came back to the stock market and big institutions controlled prices.

We are now back to 1987 when the futures control prices and the companies have to get with the program and task their CFOs or their treasurers with recognizing how things are playing out on the floor of the exchange.

The companies with stocks that are being targeted by ridiculous ETF sell programs that are counterintuitive and wrong given that oil is going down solely because there is no deal with the Russians -- and not because of demand -- should be in there buying on days like today.

They don't know, however, how it works and the brokers they ask to do the buying are almost all, by rote, putting in orders that are not meant to impact stock trading but just get the stock in to make it so the number of shares -- the divisor -- goes down so the EPS numbers go up.

It is time for these companies to step up to the plate and for the CEOs to understand what is going on with the pseudo-manipulation of their stocks. I call it "pseudo" because these algo guys don't really care which direction they whip things, they just know it's working.

This article originally appeared on Real Money on FEB 2, 2016.

[jstephencastellano]

15 of 21 Stocks Reach Price Targets in Theoretical Model Portfolio

This post is in reference to our latest model portfolio update, The Best 24 Stocks for 2016.

Today four more stocks reached their theoretical short sale price targets, including: Qorvo, Inc. (QRVO), Noble Energy, Inc. (NBL), Baker Hughes Inc. (BHI), Yahoo! Inc. (YHOO). These stocks have declined -20.7%, -15.2%, -15.0%, and -11.5% for the equivalent theoretical short sale gains. These stocks will be assumed closed at the end of trading tomorrow.

For the month to date, the theoretical Core Long Model portfolio is down -10.3% and the Core Short Model portfolio has a short sale gain of 15.1% for a theoretical Long/Short Model portfolio of +4.80%.

MTD, the theoretical Opportunistic Long Model portfolio is down -10.3%, the Core Short Model has a short sale gain of +9.96% for a Long/Short Model portfolio decline of -0.33%. The theoretical Opportunistic Short Model portfolio has assumed a 100% cash position since just prior to the January 7, 2016 close. 

The S&P 500 is down -7.73% MTD.

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[hammerstone]

Markets ended little changed on Friday...

...much different that 200-1000 point swings earlier this week amid China growth fears, in what was a very busy and hectic time week. There was certainly a lot of data/macro news over the past two weeks moving markets (U.S. economic data/stock market tantrum/impact of China yuan devaluation), and several opposing views from Fed members today ahead of the Jackson Hole summit this weekend…leaving question unanswered as to a rate hike possibility in September, or in December, or this year at all (or next).

With several important data points upcoming (Aug jobs data next Friday), it’s probably safe to say that no possibility is off the table. With that being said, today’s action was more of a wait and see approach ahead of the summit in Jackson Hole. The volatility index (VIX) closed up 2% at 26.71, down from high of 53 level on Monday.

HammerstoneReport Closing ReCap - 8/28/15

[hammerstone]

U.S. equities ended mixed on the day...

... with the Tech heavy NASDAQ led lower by weakness in the semiconductor sector after Micron (MU) posted a disappointing quarter/guidance that weighed on the sector, while the Dow Industrials posted a gain due to shares of Nike (NKE) after its earnings handily topped consensus. The NASDAQ was down as much as 1% at its worst levels. Bonds were also under pressure, with yields jumping near best levels of the year.

HammerstoneReport Closing ReCap-6/26/15

[dragonflycap]

Baker Hughes counting rigs for a push higher

Baker Hughes does pretty much anything and everything related to drilling for oil and gas anywhere.  They are involved everywhere.  That is why they are the ones that count the active rigs.  Since they are somehow involved with everyone they have an accurate count.  And those that follow the count have seen it plummet over the last 12 months.  

Baker Hughes stock price ($BHI) also did some plummeting, but not nearly as bad as more oil sensitive stocks.  It showed up on our radar at the start of April as a possible reversal candidate.  From the chart below you can see it did break out and run higher through April, only to pullback.

That pullback has continued until Monday.  But now it might be time to dip you toes back into the stock.  The stock closed last week back at the falling trend support (was resistance in April) that it launched above nearly 3 months ago.  And what happened?  Both Friday and Monday printed bottoming candlesticks and the price is moving higher Tuesday, confirming a reversal.  

The RSI is also turned back higher and rising while the MACD is trying to level and turn higher as well.  With a higher low in place, you could use the falling trend line as a stop, giving a great reward to risk ratio, even if it only gets to the top of the Bollinger Bands® near 66.

More at Dragonfly Capital