Halliburton and Baker Hughes Potential Merger

[AzCactus]

I have never invested in anything resembling a merger/arbitrage opportunity and would appreciate a little clarity.  The link below provides an article from the New York Times summarizing the terms:

 

http://dealbook.nytimes.com/2014/11/17/halliburton-to-buy-baker-hughes-for-34-billion/?_r=0

 

Under the terms of the transaction, Halliburton will pay 1.12 of its shares and $19 in cash for each Baker Hughes share. That offer was valued at about $78.62 a share on Nov. 12, the day before news of their discussions became public.

 

I have read that one potential issue is anti-trust.  However, I am really wondering how this plays out based on the falling share price of both companies.  BHI is selling at about $55/share which is about a 26% discount from the $78.62 shown above.  Can this deal be consummated based on where these companies are trading now.  I have a value of about $62 based on:

 

Halliburton price per share $38.50*1.12=$43.12

$19 in Cash

$62.12

 

$78.62-$62.12=$16.50

$16.50/$62.12=26.5%

 

Feel free to point out anything I am missing, thanks in advance for the help.

 

David

[gfp]

The deal is worth your $62.12 number and you can buy BHI in the market for 55.45.  That is the spread.  Forget about the 78.62 number.

[AzCactus]

Thanks Global that makes sense.  Sounds like BH shareholders may be in for a big decision.