Deals and IPOs

Halliburton strikes deal to buy Baker Hughes

Halliburton buys Baker Hughes for $34.6 billion

Halliburton on Monday agreed to buy Baker Hughes in a cash and stock deal valued at $34.6 billion.

The transaction was valued at $78.62 a share, with Baker Hughes shareholders receiving $19 a share in cash and 1.12 shares of Halliburton stock.

The offer is a 31 percent premium to Baker Hughes' Friday close on the New York Stock Exchange.

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The deal marks one of the rare occasions when both sets of shareholders come out in a good position, Kurt Hallead, an oil services analyst at RBCCapital Markets, told CNBC.

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In an interview on CNBC's "Squawk Box," Hallead said he expects the deal will be accretive or at least net neutral to Halliburton on an earnings per share basis. The valuation also allows Halliburton to keep its investment-grade credit rating, he added.

Shares of both companies moved higher in premarket trading immediately following the announcement, but Halliburton shares later turned lower.

Asked whether somewhat muted premarket trading in Baker Hughes shares indicated that traders were concerned the deal would not get done, Hallead said the market was still digesting the news.

"I wouldn't anticipate there's much downside risk," he said.

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Hallead said Halliburton's estimate that the deal will result in $2 billion worth of synergies seemed like a lot.

"That's not something that's going to happen on day one. That's going to take a few years to get through. So maybe a little high, but we thought maybe $1 billion was a good place to start," he said.

If approved, the deal would create an oilfield services behemoth to take on market leader Schlumberger as falling oil prices threaten to erode demand. On a pro-forma basis the combined company had 2013 revenue of $51.8 billion, more than Schlumberger's $45.3 billion.

The merger is widely expected to raise antitrust concerns.

Halliburton said on Monday that if required, it was ready to divest businesses that generate up to $7.5 billion in revenue, although it believed regulators would ask for "significantly less."

A breakup of the deal is certainly a risk given that there is significant overlap in the companies' product lines, said Jeff Tillery, managing director and head of research at Tudor Pickering Holt

"The devil will be in the details as you really line up the business, business line by business line, product line by product line," Tillery told "Squawk Box."

He noted that Halliburton is allowing room for roughly 30 percent of Baker Hughes's revenue base to be divested in order to win approval from regulators. At that level, it would still go through with the acquisition, he said.

"As we look at the overlapping businesses, we think that's reasonable and we think it's likely that any sort of forced divestitures comes in under that gap," Tillery said.

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The combined company is expected to save nearly $2 billion a year in costs.

The acquisition will add to Halliburton's cash flow by the end of the first year after closing, expected in the second half of 2015, and to earnings by the end of the second year.

Halliburton's Chief Executive, Dave Lesar, will lead the combined company.

Credit Suisse and Bank of Amerca/Merrill Lynch are Halliburton's financial advisers, while Goldman Sachs is advising Baker Hughes. Baker Botts and Wachtell, Lipton, Rosen & Katz are Halliburton's legal counsel, while Davis Polk & Wardwell and Wilmer Cutler Pickering Hale and Dorr are serving Baker Hughes.

CNBC's Tom DiChristopher and Reuters contributed to this report.