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Delaware | 3533 | 76-0207995 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Christine B. LaFollette, Esq. Mark Zvonkovic, Esq. Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, Texas 77002 (713) 220-5896 | Margaret B. Shannon, Esq. Vice President and General Counsel BJ Services Company 4601 Westway Park Blvd. Houston, Texas 77041 (713) 462-4239 | G. Michael O’Leary, Esq. Melinda Brunger, Esq. Andrews Kurth LLP 600 Travis, Suite 4200 Houston, Texas 77002 (713) 220-4200 | Louis A. Goodman, Esq. Margaret R. Cohen, Esq. Skadden, Arps, Slate, Meagher & Flom LLP One Beacon Street Boston, Massachusetts 02108 (617) 573-4800 |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
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The information in this joint proxy statement/prospectus is not complete and may be changed. Baker Hughes Incorporated may not sell the securities offered by this joint proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities nor should it be considered a solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
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Chad C. Deaton | J.W. Stewart | |
Chairman, President and Chief Executive Officer Baker Hughes Incorporated | Chairman, President and Chief Executive Officer BJ Services Company |
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1. | to consider and vote on the proposal to approve the issuance of shares of Baker Hughes common stock pursuant to the Agreement and Plan of Merger, dated as of August 30, 2009 (referred to as the merger agreement), by and among Baker Hughes, BSA Acquisition LLC, a Delaware limited liability company and a wholly owned subsidiary of Baker Hughes, and BJ Services Company, a Delaware corporation, as it may be amended from time to time (a copy of the merger agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice); | |
2. | to consider and vote upon the proposal to approve the amendment to the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan; | |
3. | to consider and vote upon the proposal to approve the amendment to the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan; | |
4. | to consider and vote on any proposal to authorize the Baker Hughes board of directors, in its discretion, to adjourn the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes at the time of the special meeting; and | |
5. | to transact any other business that may properly come before the special meeting or any adjournment or postponement of the special meeting by or at the direction of the board. |
Baker Hughes Incorporated
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4601 Westway Park Blvd.
Houston, Texas 77041
(713) 462-4239
1. | to consider and vote on the proposal to approve and adopt the Agreement and Plan of Merger, dated as of August 30, 2009 (referred to as the merger agreement), by and among Baker Hughes Incorporated, a Delaware corporation, BSA Acquisition LLC, a Delaware limited liability company and a wholly owned subsidiary of Baker Hughes Incorporated, and BJ Services, as it may be amended from time to time (a copy of the merger agreement is attached as Annex A to the joint proxy statement/prospectus accompanying this notice); | |
2. | to consider and vote on any proposal to authorize the BJ Services board of directors, in its discretion, to adjourn the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes at the time of the special meeting; and | |
3. | to transact any other business that may properly come before the special meeting or any adjournment or postponement of the special meeting by or at the direction of the board. |
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Baker Hughes Incorporated Attention: Corporate Secretary 2929 Allen Parkway, Suite 2100 Houston, Texas77019-2118 (713) 439-8600 www.bakerhughes.com | BJ Services Company Attention: Investor Relations P.O. Box 4442 Houston, Texas 77210-4442 (713) 462-4329 www.bjservices.com |
Laurel Hill Advisory Group, LLC Attention: Eugene Louie 2 Robbins Lane, Suite 201 Jericho, NY 11753 (888) 742-1305 elouie@laurelhillag.com | Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, NY 10022 Shareholders Call Toll-Free at: (877) 825-8772 Banks and Brokers Call Collect at: (212)750-5833 |
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F-1 |
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Annexes | ||||||||
Agreement and Plan of Merger | ||||||||
Opinion of Goldman, Sachs & Co. | ||||||||
Opinion of Greenhill & Co., LLC | ||||||||
Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||||||
Section 262 of the General Corporation Law of the State of Delaware | ||||||||
Annex F | Intentionally Not Used | |||||||
Amendment to the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan | ||||||||
Amendment to the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan | ||||||||
Baker Hughes Incorporated Unaudited Financial Information for the Year 2009 | ||||||||
EX-5.1 | ||||||||
EX-8.1 | ||||||||
EX-8.2 | ||||||||
EX-23.4 | ||||||||
EX-23.5 | ||||||||
EX-99.2 | ||||||||
EX-99.4 | ||||||||
EX-99.5 |
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Q: | What is the proposed transaction? |
A: | Baker Hughes and BJ Services have entered into a merger agreement pursuant to which BJ Services will merge with and into Merger Sub, with Merger Sub surviving the merger as a wholly owned subsidiary of Baker Hughes. Each issued and outstanding share of BJ Services common stock will be converted into the right to receive (i) 0.40035 shares of Baker Hughes common stock, par value $1.00 per share, and (ii) $2.69 in cash, as described under “The Merger Agreement — Merger Consideration” beginning on page 90. |
Q: | Why are Baker Hughes and BJ Services proposing the merger? |
A: | The boards of directors of Baker Hughes and BJ Services believe that the combination of Baker Hughes and BJ Services will enhance the combined company’s position as a top-tier global oilfield services company. To review the reasons for the merger in greater detail, see “The Merger — Recommendation of the Baker Hughes Board of Directors and Its Reasons for the Merger” beginning on page 47 and “The Merger — Recommendation of the BJ Services Board of Directors and Its Reasons for the Merger” beginning on page 50. |
Q: | Why am I receiving this joint proxy statement/prospectus? | |
A: | Baker Hughes stockholders are being asked to approve (1) the issuance of shares of Baker Hughes common stock pursuant to the merger agreement, (2) the amendment to the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan, which we refer to as the BHI D&O LTIP and (3) the amendment to the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan, which we refer to as the BHI Employee LTIP. | |
BJ Services stockholders are being asked to approve and adopt the merger agreement. | ||
Q: | What vote is required to approve the proposals at the Baker Hughes special meeting and the BJ Services special meeting? | |
A. | The approval by the Baker Hughes stockholders of the issuance of shares of Baker Hughes common stock pursuant to the merger agreement and the approval and adoption by the BJ Services stockholders of the merger agreement are required for the consummation of the merger. | |
The approval of the issuance of shares of Baker Hughes common stock pursuant to the merger agreement and the approval of the amendments to the BHI D&O LTIP and the BHI Employee LTIP each require the affirmative vote of the holders of at least a majority of the shares of Baker Hughes common stock present and voting at the special meeting, provided that the total number of votes cast represents a majority of the outstanding shares of Baker Hughes common stock entitled to vote. Approval of any proposal to authorize the Baker Hughes board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies requires the affirmative vote of |
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the holders of a majority of the shares present in person or represented by proxy at the special meeting and entitled to vote on the adjournment. | ||
Each share of Baker Hughes common stock is entitled to one vote on (1) the issuance of shares of Baker Hughes common stock pursuant to the merger agreement, (2) the approval of the amendment to the BHI D&O LTIP, (3) the approval of the amendment to the BHI Employee LTIP and (4) the approval of any proposal to adjourn the special meeting if necessary to solicit additional proxies. | ||
Approval and adoption of the merger agreement requires the affirmative vote of the holders of at least a majority of the outstanding shares of BJ Services common stock entitled to vote, and approval of the proposal to authorize the BJ Services board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies requires the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the special meeting and entitled to vote on the adjournment. Each share of BJ Services common stock is entitled to one vote on (1) the approval and adoption of the merger agreement and (2) the approval of any proposal to adjourn the special meeting if necessary to solicit additional proxies. | ||
Your vote is very important. You are encouraged to submit a proxy as soon as possible. | ||
Q: | If my shares of Baker Hughes common stock or BJ Services common stock are held in “street name” by my broker or other nominee, will my broker or other nominee vote my shares of Baker Hughes common stock or BJ Services common stock for me? | |
A: | Unless you instruct your broker how to vote your shares of Baker Hughes common stock or BJ Services common stock, as applicable, your shares willNOT be voted. | |
In connection with the Baker Hughes special meeting, abstentions and broker non-votes will be considered in determining the presence of a quorum. However, because broker non-votes are not considered votes cast, they will not have any effect on the outcome of the vote with respect to the proposals to approve (i) the issuance of shares of Baker Hughes common stock pursuant to the merger agreement and the amendments to the BHI D&O LTIP and the BHI Employee LTIP (assuming a quorum is present) and (ii) the authorization of the Baker Hughes board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies. Abstentions will have the same effect as votes cast AGAINST each of the proposals to approve (i) the issuance of shares of Baker Hughes common stock pursuant to the merger agreement and the amendments to the BHI D&O LTIP and the BHI Employee LTIP (assuming a quorum is present) and (ii) the authorization of the Baker Hughes board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies. | ||
In connection with the BJ Services special meeting, abstentions and broker non-votes will be considered in determining the presence of a quorum and will have the same effect as votes cast AGAINST the approval and adoption of the merger agreement. Abstentions will have the same effect as votes cast AGAINST approval of any proposal to authorize the BJ Services board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies. Broker non-votes will have no effect on approval of any proposal to authorize the BJ Services board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies. | ||
An abstention occurs when a stockholder abstains from voting (either in person or by proxy) on one or more of the proposals. Broker non-votes occur when a bank, broker or other nominee returns a proxy but does not have authority to vote on a particular proposal. You should therefore provide your broker or other nominee with instructions as to how to vote your shares of Baker Hughes common stock or BJ Services common stock. | ||
Q: | Are there risks associated with the merger that I should consider in deciding how to vote? | |
A: | Yes. There are a number of risks related to the merger that are discussed in this joint proxy statement/prospectus and in other documents incorporated by reference. You should read carefully the |
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detailed description of the risks associated with the merger and the operations of Baker Hughes after the merger described in “Risk Factors” beginning on page 29. |
Q: | If I am a BJ Services stockholder, should I send in my stock certificates with my proxy card? | |
A: | NO. PleaseDO NOTsend your BJ Services stock certificates with your proxy card. If the merger is approved, you will be sent written instructions for exchanging your stock certificates. | |
Q: | What effect will the merger have on options to purchase BJ Services common stock and otherstock-based awards that have been granted to employees and directors of BJ Services? |
A: | Employees will not be permitted to purchase BJ Services common stock under the BJ Services employee stock purchase plan, assuming that the merger is consummated prior to September 30, 2010. Under the BJ Services incentive plans, any then outstanding options to purchase BJ Services common stock will become fully exercisable upon approval and adoption of the merger agreement by the BJ Services stockholders. Under the merger agreement, upon the effective time of the merger any then outstanding options to purchase BJ Services common stock, other than options under the BJ Services employee stock purchase plan, will be assumed by Baker Hughes and converted into options to purchase Baker Hughes common stock with appropriate adjustments to be made to the number of shares and the exercise prices under the assumed options based upon a formula using a stock award exchange ratio specified in the merger agreement. Under the BJ Services incentive plans, the vesting restrictions applicable to the then outstanding performance unit awards and phantom stock awards will lapse upon the approval and adoption of the merger agreement by the BJ Services stockholders. In addition, under the BJ Services incentive plans, each holder of performance unit awards or phantom stock awards is also entitled to receive a cash bonus equal to an amount that is a taxgross-up for any applicable federal and state income taxes, as well as excise or other taxes. Under the merger agreement, the holder of any then outstanding performance unit awards, phantom stock awards and bonus stock awards as of the effective time of the merger will be entitled to receive the per share merger consideration for each unit or share subject to the award upon the effective time of the merger. For a more complete description of the effect of the merger on stock-based awards, see “The Merger Agreement — Treatment of Options and Other Equity Awards” beginning on page 92. |
Q: | What conditions are required to be fulfilled to complete the merger? |
A: | Baker Hughes and BJ Services are not required to complete the merger unless certain specified conditions are satisfied or waived. These conditions include approval by Baker Hughes stockholders of the issuance of the shares of Baker Hughes common stock pursuant to the merger agreement, approval and adoption by BJ Services stockholders of the merger agreement, the effectiveness of theForm S-4 registration statement, of which this joint proxy statement/prospectus is a part, the receipt of tax opinions from counsel for each of Baker Hughes and BJ Services to the effect that the merger will be treated as a “reorganization” within the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code, and the receipt of required regulatory approvals. Baker Hughes and BJ Services are seeking required approvals from regulatory agencies under the antitrust laws, including the termination or expiration of the applicable waiting period under theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the HSR Act, andnon-U.S. antitrust or competition merger control statutes. There can be no assurance that these conditions to complete the merger will be satisfied. For a more complete summary of the conditions that must be satisfied or waived prior to the effective time of the merger, see “The Merger Agreement — Conditions to the Completion of the Merger” beginning on page 95. |
Q: | What are the tax consequences of the merger? | |
A: | Baker Hughes and BJ Services each expect the merger to qualify as a reorganization pursuant to section 368(a) of the Code. |
Please review carefully the information under the caption “The Merger — Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 84 for a description of material U.S. |
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federal income tax consequences of the merger. The tax consequences to you will depend on your own situation. Please consult your tax advisors for a full understanding of the tax consequences of the merger to you. | ||
Q: | How will Baker Hughes pay the cash component of the merger consideration? | |
A: | Baker Hughes’ obligation to complete the merger is not conditioned upon its obtaining financing. Baker Hughes anticipates that approximately $794 million will be required to pay the aggregate cash portion of the merger consideration to the BJ Services stockholders. Baker Hughes intends to fund the cash component of the transaction through internal cash resources and other sources of debt financing. |
For a more complete discussion of sources of funding for the merger and related costs, see “Source of Funding for the Merger” beginning on page 115. |
Q: | When do Baker Hughes and BJ Services expect to complete the merger? |
A: | Baker Hughes and BJ Services are working to complete the merger as quickly as practicable. We currently expect the merger to be completed during the first calendar quarter of 2010. However, neither Baker Hughes nor BJ Services can predict the effective time of the merger because it is subject to conditions both within and beyond each company’s control. See “The Merger Agreement — Conditions to the Completion of the Merger” beginning on page 95. |
Q: | Are BJ Services stockholders entitled to appraisal rights? | |
A: | Yes. Holders of BJ Services common stock who do not vote in favor of the merger will be entitled to exercise appraisal rights in connection with the merger, and, if such rights are properly demanded and perfected and not withdrawn or lost and the merger is completed, such stockholders will be entitled to obtain payment for the judicially determined fair value of their shares of BJ Services common stock. | |
Q: | How does the Baker Hughes board of directors recommend that Baker Hughes stockholders vote? |
A: | The Baker Hughes board of directors has determined that the execution and delivery of the merger agreement is advisable and the transactions contemplated by the merger agreement, including the issuance of shares of Baker Hughes common stock pursuant to the merger agreement, are in the best interests of the Baker Hughes stockholders and recommends that Baker Hughes stockholders vote FOR the proposal to approve the issuance of shares of Baker Hughes common stock pursuant to the merger agreement and FOR any proposal to authorize the Baker Hughes board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies.For a more complete description of the recommendation of the Baker Hughes board of directors, see “The Merger — Recommendation of the Baker Hughes Board of Directors and Its Reasons for the Merger” beginning on page 47. |
The Baker Hughes board of directors recommends that Baker Hughes stockholders vote FOR the proposal to approve the amendment to the BHI D&O LTIP and the amendment to the BHI Employee LTIP, which are described in detail in this joint proxy statement/prospectus.See “Proposal No. 2 Approval of Amendment to the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan” beginning on page 129 and “Proposal No. 3 Approval of Amendment to the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan” beginning on page 132. |
Q: | How does the BJ Services board of directors recommend that BJ Services stockholders vote? | |
A: | The BJ Services board of directors has determined that the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of BJ Services and its stockholders and recommends that BJ Services stockholders vote FOR the proposal to approve and adopt the merger agreement and FOR any proposal to authorize the BJ Services board of directors, in its discretion, to adjourn the special meeting if necessary to |
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solicit additional proxies.For a more complete description of the recommendation of the BJ Services board of directors, see “The Merger — Recommendation of the BJ Services Board of Directors and Its Reasons for the Merger” beginning on page 50. |
Q: | When and where is the special meeting of the Baker Hughes stockholders? |
A: | The Baker Hughes special meeting will be held on , 2010 at :00 a.m., local time, at , Houston, Texas. |
Q: | When and where is the special meeting of the BJ Services stockholders? |
A: | The BJ Services special meeting will be held on , 2010 at :00 a.m., local time, at , Houston, Texas. |
Q: | Who can vote at the special meetings? |
A: | All Baker Hughes stockholders of record as of the close of business on , 2010, the record date for the Baker Hughes special meeting, are entitled to receive notice of and to vote at the Baker Hughes special meeting. |
All BJ Services stockholders of record as of the close of business on , 2010, the record date for the BJ Services special meeting, are entitled to receive notice of and to vote at the BJ Services special meeting. |
Q: | How will Baker Hughes stockholders be affected by the merger and share issuance? | |
A: | After the merger, each Baker Hughes stockholder will have the same number of shares of Baker Hughes common stock that the stockholder held immediately prior to the merger. However, because Baker Hughes will be issuing new shares of Baker Hughes common stock to BJ Services stockholders in the merger, each outstanding share of Baker Hughes common stock immediately prior to the merger will represent a smaller percentage of the aggregate number of shares of Baker Hughes capital stock outstanding after the merger. As a result of the merger, each Baker Hughes stockholder will own shares in a larger company with more assets. | |
Q: | Why are amendments to the Baker Hughes’ Long-Term Incentive Plans being adopted? | |
A: | Baker Hughes stockholders will vote at the Baker Hughes special meeting on a proposal to approve the adoption of the amendments to the BHI D&O LTIP and the BHI Employee LTIP to increase the number of shares of Baker Hughes common stock available for issuance under the plans and to extend until September 18, 2019, the period during which awards may be made under the plans. As of September 17, 2009, 1,466,806 shares of Baker Hughes common stock remained available for issuance under the BHI D&O LTIP. The Baker Hughes board of directors has amended the BHI D&O LTIP, subject to approval by Baker Hughes stockholders, to increase by 3,000,000 the number of shares of Baker Hughes common stock available for issuance under the BHI D&O LTIP from 7,000,000 shares to 10,000,000 shares. As of September 17, 2009, 30,161 shares of Baker Hughes common stock remained available for issuance under the BHI Employee LTIP. The Baker Hughes board of directors has amended the BHI Employee LTIP, subject to approval by Baker Hughes stockholders, to increase by 12,500,000 the number of shares of Baker Hughes common stock available for issuance under the BHI Employee LTIP from 9,500,000 shares to 22,000,000 shares. Both the BHI D&O LTIP and the BHI Employee LTIP previously provided that no further awards would be made after March 5, 2012. The Baker Hughes board of directors has amended the BHI D&O LTIP and the BHI Employee LTIP, subject to approval by Baker Hughes stockholders, to extend until September 18, 2019, the period during which awards may be made under the plans. In order to provide the compensation committee of the Baker Hughes board of directors more flexibility in determining the types of awards that may be granted under the BHI D&O LTIP and the BHI Employee LTIP, while taking into account stockholder anti-dilution interests, the amendment would remove the 3,000,000 limitation on the aggregate number of shares of Baker Hughes common stock that may be issued under each of the BHI D&O LTIP and the BHI Employee LTIP during the terms of the plans |
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in a form other than stock options and instead provide that an award payable in shares of Baker Hughes common stock granted under the plans after the date of stockholder approval of the amendment (other than a stock option or a stock appreciation right) shall count against the overall share limit under the plans as 1.60 shares for every share subject to the award. Shares of Baker Hughes common stock subject to an award in the form of a stock option or a stock appreciation right would continue to count against the overall share limits under the BHI D&O LTIP and the BHI Employee LTIP as 1.00 share for every share subject to the award. The Baker Hughes board of directors believes that these amendments are necessary to provide long-term vehicles for the grants of equity-based compensation incentives to employees, officers and directors of Baker Hughes and its affiliates and to ensure that Baker Hughes has a sufficient number of shares available under its stock incentive plans to make equity-based incentive awards to a larger population of such persons following the merger. | ||
The merger is not conditioned upon the approval of the proposals to approve the amendments to the BHI D&O LTIP and the BHI Employee LTIP. However, if the proposals to amend the BHI D&O LTIP and the BHI Employee LTIP are approved by Baker Hughes stockholders, but the merger is not consummated, then 3,000,000 additional shares of Baker Hughes common stock will be available for issuance under the BHI D&O LTIP, 12,500,000 additional shares of Baker Hughes common stock will be available for issuance under the BHI Employee LTIP and awards may be made under such plans until September 18, 2019. | ||
Q: | What do I need to do now? | |
A: | After you have carefully read this joint proxy statement/prospectus, please respond by completing, signing and dating your proxy card and returning it in the enclosed postage-paid envelope or, if available, by submitting your proxy by telephone or through the Internet as soon as possible so that your shares of Baker Hughes common stock or BJ Services common stock will be represented and voted at the Baker Hughes special meeting or BJ Services special meeting, as applicable. | |
Please refer to your proxy card or the information forwarded by your broker or other nominee to see which voting options are available to you. | ||
The Internet and telephone proxy submission procedures are designed to verify your stock holdings and to allow you to confirm that your instructions have been properly recorded. | ||
The method by which you submit a proxy will in no way limit your right to vote at the Baker Hughes special meeting or the BJ Services special meeting if you later decide to attend the meeting in person. If your shares of Baker Hughes common stock or BJ Services common stock are held in the name of a broker or other nominee, you must obtain a proxy, executed in your favor, from the holder of record, to be able to vote at the Baker Hughes special meeting or the BJ Services special meeting. | ||
Q: | How will my proxy be voted? | |
A: | All shares of Baker Hughes common stock entitled to vote and represented by properly completed proxies received prior to the Baker Hughes special meeting, and not revoked, will be voted at the Baker Hughes special meeting as instructed on the proxies.If you properly complete, sign and return a proxy card, but do not indicate how your shares of Baker Hughes common stock should be voted on a matter, the shares of Baker Hughes common stock represented by your proxy will be voted as the Baker Hughes board of directors recommends and therefore FOR the approval of the issuance of shares of Baker Hughes common stock pursuant to the merger agreement, FOR the approval of the amendment to the BHI D&O LTIP, FOR the approval of the amendment to the BHI Employee LTIP and FOR any proposal to authorize the Baker Hughes board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies. |
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All shares of BJ Services common stock entitled to vote and represented by properly completed proxies received prior to the BJ Services special meeting, and not revoked, will be voted at the BJ Services special meeting as instructed on the proxies.If you properly complete, sign and return a proxy card, but do not indicate how your shares of BJ Services common stock should be voted on a matter, the shares of BJ Services common stock represented by your proxy will be voted as the BJ Services board of directors recommends and therefore FOR the approval and adoption of the merger agreement and FOR any proposal to authorize the BJ Services board of directors, in its discretion, to adjourn the special meeting if necessary to solicit additional proxies. | ||
Q: | Can I revoke my proxy or change my vote after I have delivered my proxy? | |
A: | Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the Baker Hughes special meeting or the BJ Services special meeting, as applicable. You can do this in any of the three following ways: | |
• | by sending a written notice to the Corporate Secretary of Baker Hughes or the Secretary of BJ Services, as applicable, at the address set forth below, in time to be received before the Baker Hughes special meeting or the BJ Services special meeting, as applicable, stating that you would like to revoke your proxy; | |
• | by completing, signing and dating another proxy card and returning it by mail in time to be received before the Baker Hughes special meeting or BJ Services special meeting or, by submitting a later dated proxy by the Internet or telephone in which case your later-submitted proxy will be recorded and your earlier proxy revoked; or | |
• | if you are a holder of record, by attending the special meeting and voting in person. Simply attending the Baker Hughes special meeting or BJ Services special meeting without voting will not revoke your proxy or change your vote. | |
If your shares of Baker Hughes common stock or BJ Services common stock are held in an account at a broker or other nominee and you desire to change your vote, you should contact your broker or other nominee for instructions on how to do so. | ||
Q: | What should I do if I receive more than one set of voting materials for the Baker Hughes special meeting or the BJ Services special meeting? | |
A: | You may receive more than one set of voting materials for the Baker Hughes special meeting or the BJ Services special meeting, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares of Baker Hughes common stock or BJ Services common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares of Baker Hughes common stock or BJ Services common stock. If you are a holder of record and your shares of Baker Hughes common stock or BJ Services common stock are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive. | |
Q: | What happens if I am a stockholder of both Baker Hughes and BJ Services? | |
A: | You will receive separate proxy cards for each company and must complete, sign and date each proxy card and return each proxy card in the appropriate postage-paid envelope or, if available, by submitting a proxy by telephone or through the internet for each company. |
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Q: | Who can answer my questions? | |
A: | If you have any questions about the merger or how to submit your proxy, or if you need additional copies of this joint proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact: |
If you are a Baker Hughes stockholder: | If you are a BJ Services stockholder: | |
Baker Hughes Incorporated Attention: Corporate Secretary 2929 Allen Parkway, Suite 2100 Houston, Texas 77019 (713) 439-8600 www.bakerhughes.com | BJ Services Company Attention: Investor Relations P.O. Box 4442 Houston, Texas 77210-4442 (713) 462-4239 www.bjservices.com | |
Proxy Solicitor: Laurel Hill Advisory Group, LLC Attention: Eugene Louie 2 Robbins Lane, Suite 201 Jericho, NY 11753 (888)742-1305 elouie@laurelhillag.com | Proxy Solicitor: Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, NY 10022 Shareholders Call Toll-Free at: (877)825-8772 Banks and Brokers Call Collect at: (212)750-5833 |
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• | the approval by Baker Hughes stockholders of the issuance of the shares of Baker Hughes common stock pursuant to the merger agreement; | |
• | the approval and adoption of the merger agreement by BJ Services stockholders; | |
• | the expiration or termination of the waiting period (and any extension of the waiting period) applicable to the merger under the HSR Act andnon-U.S. antitrust or competition merger control statutes; | |
• | the effectiveness of theForm S-4 registration statement, of which this joint proxy statement/prospectus is a part, and the absence of a stop order suspending the effectiveness of theForm S-4 or proceedings for such purpose pending before or threatened by the SEC; | |
• | the approval for listing on the NYSE of the shares of Baker Hughes common stock issuable to the BJ Services stockholders pursuant to the merger agreement, subject to official notice of issuance; | |
• | the receipt by each party of an opinion from that party’s counsel to the effect that the merger will be treated as a “reorganization” within the meaning of section 368(a) of the Code and that Baker Hughes and BJ Services will each be treated as a “party to a reorganization” within the meaning of section 368(b) of the Code; and | |
• | the accuracy of the representations and warranties of Baker Hughes, BJ Services and Merger Sub in the merger agreement, subject to the material adverse effect standard provided in the merger agreement and described below, with specified exceptions. |
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• | by mutual written consent of Baker Hughes and BJ Services; | |
• | by either Baker Hughes or BJ Services if: |
• | the merger is not completed on or before March 1, 2010 (subject to certain exceptions in connection with the stockholder meetings and related disclosure and with the expiration or termination of the waiting period, and any extension thereof, under the HSR Act), referred to as the termination date; | |
• | any injunction, judgment, order or decree prohibiting or permanently enjoining the closing of the merger is in effect and has become final and nonappealable; | |
• | the BJ Services stockholders fail to approve and adopt the merger agreement at the BJ Services special meeting; or | |
• | the Baker Hughes stockholders fail to approve the issuance of shares of Baker Hughes common stock pursuant to the merger agreement at the Baker Hughes special meeting; |
• | by BJ Services if: |
• | Baker Hughes has breached or failed to perform its representations, warranties, covenants or other agreements in the merger agreement, which would give rise to the failure of a condition to closing of the merger and is incapable of being cured prior to the termination date or is not cured by Baker Hughes within 30 days following notice from BJ Services; | |
• | prior to the approval and adoption by BJ Services stockholders of the merger agreement, the BJ Services board of directors has received a competing superior proposal and has not violated the no solicitation provisions of the merger agreement with respect to such proposal, and BJ Services terminates the merger agreement in accordance with its terms (including negotiating with Baker |
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Hughes to amend the merger agreement prior to such termination and payment of the termination fee described below); or |
• | the Baker Hughes board of directors withdraws or adversely changes its recommendation to its stockholders. |
• | by Baker Hughes if: |
• | BJ Services has breached or failed to perform its representations, warranties, covenants or other agreements in the merger agreement, which would give rise to the failure of a condition to closing of the merger and is incapable of being cured prior to the termination date or is not cured by BJ Services within 30 days following notice from Baker Hughes; | |
• | prior to the approval and adoption by Baker Hughes stockholders of the merger agreement, the Baker Hughes board of directors has received a competing superior proposal and Baker Hughes terminates the merger agreement in accordance with its terms (including advance notice to BJ Services of such termination and payment of the termination fee described below); | |
• | the BJ Services board of directors withdraws or adversely changes its recommendation to its stockholders; or | |
• | BJ Services has breached or failed to perform in any material respect any of its obligations under the no solicitation provisions of the merger agreement. |
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Nine Months Ended | ||||||||||||||||||||||||||||
September 30, | ||||||||||||||||||||||||||||
(unaudited) | Fiscal Year Ended December 31, | |||||||||||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||||||
Revenues | $ | 7,236 | $ | 8,678 | $ | 11,864 | $ | 10,428 | $ | 9,027 | $ | 7,185 | $ | 6,080 | ||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||
Cost of revenues | 5,518 | 5,794 | 7,954 | 6,845 | 5,876 | 5,024 | 4,428 | |||||||||||||||||||||
Research and engineering | 299 | 312 | 426 | 372 | 339 | 300 | 272 | |||||||||||||||||||||
Marketing, general and administrative | 835 | 798 | 1,046 | 933 | 878 | 628 | 563 | |||||||||||||||||||||
Acquisition-related costs | 2 | — | — | — | — | — | — | |||||||||||||||||||||
Litigation settlement | — | 62 | 62 | — | — | — | — | |||||||||||||||||||||
Total costs and expenses | 6,654 | 6,966 | 9,488 | 8,150 | 7,093 | 5,952 | 5,263 | |||||||||||||||||||||
Operating income | 582 | 1,712 | 2,376 | 2,278 | 1,934 | 1,233 | 817 | |||||||||||||||||||||
Equity in income of affiliates | — | 1 | 2 | 1 | 60 | 100 | 36 | |||||||||||||||||||||
Gain on sale of product line | — | 28 | 28 | — | — | — | — | |||||||||||||||||||||
Gain on sale of interest in affiliate | — | — | — | — | 1,744 | — | — | |||||||||||||||||||||
Impairment loss on investments | — | — | (25 | ) | — | — | — | — | ||||||||||||||||||||
Interest expense | (98 | ) | (53 | ) | (89 | ) | (66 | ) | (69 | ) | (72 | ) | (84 | ) | ||||||||||||||
Interest and dividend income | 5 | 22 | 27 | 44 | 68 | 18 | 7 | |||||||||||||||||||||
Income from continuing operations before income taxes | 489 | 1,710 | 2,319 | 2,257 | 3,737 | 1,279 | 776 | |||||||||||||||||||||
Income taxes | (152 | ) | (507 | ) | (684 | ) | (743 | ) | (1,338 | ) | (405 | ) | (250 | ) | ||||||||||||||
Income from continuing operations | 337 | 1,203 | 1,635 | 1,514 | 2,399 | 874 | 526 | |||||||||||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | 20 | 5 | 3 | |||||||||||||||||||||
Income before cumulative effect of accounting change | 337 | 1,203 | 1,635 | 1,514 | 2,419 | 879 | 529 | |||||||||||||||||||||
Cumulative effect of accounting change, net of tax | — | — | — | — | — | (1 | ) | — | ||||||||||||||||||||
Net income | $ | 337 | $ | 1,203 | $ | 1,635 | $ | 1,514 | $ | 2,419 | $ | 878 | $ | 529 | ||||||||||||||
Per share of common stock: | ||||||||||||||||||||||||||||
Income from continuing operations: | ||||||||||||||||||||||||||||
Basic | $ | 1.09 | $ | 3.91 | $ | 5.32 | $ | 4.76 | $ | 7.26 | $ | 2.58 | $ | 1.57 | ||||||||||||||
Diluted | 1.09 | 3.89 | 5.30 | 4.73 | 7.21 | 2.56 | 1.57 | |||||||||||||||||||||
Dividends | 0.45 | 0.41 | 0.56 | 0.52 | 0.52 | 0.48 | 0.46 |
As of September 30, | ||||||||||||||||||||||||
(unaudited) | As of December 31, | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
Cash, cash equivalents and short-term investments | $ | 1,487 | $ | 1,955 | $ | 1,054 | $ | 1,104 | $ | 774 | $ | 319 | ||||||||||||
Working capital | 4,639 | 4,634 | 3,837 | 3,346 | 2,479 | 1,738 | ||||||||||||||||||
Total assets | 11,183 | 11,861 | 9,857 | 8,706 | 7,807 | 6,821 | ||||||||||||||||||
Long-term debt | 1,783 | 1,775 | 1,069 | 1,074 | 1,078 | 1,086 | ||||||||||||||||||
Stockholders’ equity | 7,185 | 6,807 | 6,306 | 5,243 | 4,698 | 3,895 |
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(1) | 2008 income from continuing operations includes a net charge of $62 million relating to the settlement of litigation with ReedHycalog. | |
(2) | 2008 income from continuing operations includes $28 million for the gain on the sale of the Completion and Production segment’s Surface Safety Systems product line. | |
(3) | 2008 income from continuing operations includes a charge for impairment loss on investments of $25 million relating to auction rate securities. | |
(4) | On April 28, 2006, Baker Hughes sold its 30% interest in WesternGeco, a seismic venture formed with Schlumberger in 2000, and recorded a gain of $1,744 million on the sale. | |
(5) | The selected financial data includes reclassifications to reflect Baker Supply Products Division, as discontinued operations. | |
(6) | In 2005, Baker Hughes adopted Financial Accounting Standards Board Interpretation No. 47,Accounting for Conditional Asset Retirement Obligations. |
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Fiscal Year Ended September 30, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
Operating Data: | ||||||||||||||||||||
Revenue | $ | 4,122 | $ | 5,359 | $ | 4,731 | $ | 4,292 | $ | 3,171 | ||||||||||
Operating expenses(1) | 3,893 | 4,446 | 3,578 | 3,119 | 2,537 | |||||||||||||||
Operating income | 229 | 913 | 1,153 | 1,173 | 634 | |||||||||||||||
Interest expense | (27 | ) | (28 | ) | (33 | ) | (15 | ) | (11 | ) | ||||||||||
Interest income | 1 | 2 | 2 | 15 | 11 | |||||||||||||||
Other income (expense), net(2) | (9 | ) | (9 | ) | (8 | ) | (1 | ) | 16 | |||||||||||
Income tax expense | (28 | ) | (258 | ) | (360 | ) | (367 | ) | (200 | ) | ||||||||||
Income from continuing operations | 166 | 620 | 754 | 805 | 450 | |||||||||||||||
Net income | $ | 150 | $ | 609 | $ | 754 | $ | 805 | $ | 453 | ||||||||||
Depreciation and amortization | $ | 296 | $ | 264 | $ | 207 | $ | 163 | $ | 132 | ||||||||||
Capital expenditures(3) | 394 | 606 | 742 | 456 | 319 | |||||||||||||||
Per Share Data(4): | ||||||||||||||||||||
Income from continuing operations: | ||||||||||||||||||||
Basic | $ | 0.57 | $ | 2.11 | $ | 2.57 | $ | 2.55 | $ | 1.39 | ||||||||||
Diluted | 0.57 | 2.10 | 2.55 | 2.52 | 1.37 | |||||||||||||||
Net income: | ||||||||||||||||||||
Basic | 0.51 | 2.08 | 2.57 | 2.55 | 1.40 | |||||||||||||||
Diluted | 0.51 | 2.06 | 2.55 | 2.52 | 1.38 | |||||||||||||||
Cash dividends per share | 0.20 | 0.20 | 0.20 | 0.20 | 0.17 |
As of September 30, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Financial Position (at end of period): | ||||||||||||||||||||
Property, net | $ | 2,374 | $ | 2,280 | $ | 1,931 | $ | 1,367 | $ | 1,057 | ||||||||||
Total assets | 5,147 | 5,322 | 4,715 | 3,862 | 3,410 | |||||||||||||||
Long-term debt and capital leases, excluding current maturities | 502 | 506 | 253 | 500 | — | |||||||||||||||
Stockholders’ equity | 3,520 | 3,442 | 2,851 | 2,147 | 2,492 |
(1) | Fiscal 2009 includes a $22 million pension settlement charge and $5 million of costs related to the Baker Hughes merger. |
(2) | Fiscal 2005 includes $9 million in misappropriated funds from the Asia Pacific region repaid to BJ Services and $10 million for the reversal of excess accrued liabilities in the Asia Pacific region. |
(3) | Excludes acquisitions of businesses. Includes $48 million in fiscal 2007 to purchase assets from an equipment financing partnership. |
(4) | Earnings per share amounts have been restated for all periods presented to reflect the increased number of common shares outstanding, resulting from the2-for-1 stock split effective September 1, 2005. |
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Nine Months Ended | Year Ended | |||||||
September 30, 2009 | December 31, 2008 | |||||||
(In millions, except | ||||||||
per share data) | ||||||||
Pro Forma Condensed Combined Statement of Operations Data: | ||||||||
Revenues | $ | 9,941 | $ | 17,223 | ||||
Cost of revenues | 7,972 | 12,048 | ||||||
Gross profit(1) | 1,621 | 4,677 | ||||||
Net income from continuing operations | 352 | 2,254 | ||||||
Diluted earnings per share from continuing operations | $ | 0.82 | $ | 5.27 |
(1) | Represents revenues less cost of revenues and research and engineering. |
As of | ||||
September 30, 2009 | ||||
(In millions) | ||||
Pro Forma Condensed Combined Balance Sheet Data: | ||||
Working capital | $ | 4,552 | ||
Total assets | 18,955 | |||
Long-term debt | 2,282 | |||
Stockholders’ equity | 12,538 |
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Baker Hughes | BJ Services | |||||||||||||||
Fiscal Year | Fiscal Year | Pro Forma | ||||||||||||||
Ended | Ended | Combined | ||||||||||||||
December 31, | September 30, | Pro Forma | Equivalent | |||||||||||||
2008 | 2008 | Combined(1) | Data(2) | |||||||||||||
Basic earnings per share from continuing operations | $ | 5.32 | $ | 2.11 | $ | 5.30 | $ | 2.12 | ||||||||
Diluted earnings per share from continuing operations | 5.30 | 2.10 | 5.27 | 2.11 | ||||||||||||
Cash dividends declared per share | 0.56 | 0.20 | — | — |
Baker Hughes | BJ Services | |||||||||||||||
Pro Forma | ||||||||||||||||
Nine Months | Nine Months | Combined | ||||||||||||||
Ended | Ended | Pro Forma | Equivalent | |||||||||||||
September 30, 2009 | September 30, 2009 | Combined(1) | Data(2) | |||||||||||||
Basic earnings per share from continuing operations | $ | 1.09 | $ | 0.05 | $ | 0.82 | $ | 0.33 | ||||||||
Diluted earnings per share from continuing operations | 1.09 | 0.05 | 0.82 | 0.33 | ||||||||||||
Book value per share at period end(3) | 23.18 | 12.05 | 29.29 | 11.73 | ||||||||||||
Cash dividends declared per share | 0.45 | 0.15 | — | — |
(1) | The pro forma statement of operations for fiscal year 2008 was prepared by combining the Baker Hughes historical consolidated statement of operations for the fiscal year ended December 31, 2008 and the BJ Services historical consolidated statement of operations for the fiscal year ended September 30, 2008. The pro forma statement of operations for the nine months ended September 30, 2009 was prepared by combining the Baker Hughes and BJ Services historical consolidated statements of operations for the three months ended March 31, 2009, the three months ended June 30, 2009 and the three months ended September 30, 2009. |
(2) | Pro forma combined equivalent data is calculated by multiplying the combined pro forma amounts by the stock exchange ratio of 0.40035. | |
(3) | Historical book value per share is computed by dividing stockholders’ equity by the number of Baker Hughes or BJ Services common shares outstanding. Pro forma book value per share is computed by dividing pro forma stockholders’ equity by the pro forma number of Baker Hughes common shares outstanding. |
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Equivalent | ||||||
Per Share of | ||||||
Baker Hughes | BJ Services | BJ Services | ||||
Common Stock | Common Stock | Common Stock | ||||
August 28, 2009 | $38.09 | $15.43 | $17.94 | |||
January 15, 2010 | $47.28 | $21.46 | $21.62 |
Baker Hughes | ||||||||||||
Common Stock | ||||||||||||
Cash Dividends | ||||||||||||
High | Low | Declared | ||||||||||
Fiscal Year Ended December 31, 2010: | ||||||||||||
First Quarter (through January 15, 2010) | $ | 47.98 | $ | 41.00 | $ | — | ||||||
Fiscal Year Ended December 31, 2009: | ||||||||||||
Fourth Quarter | $ | 47.67 | $ | 38.04 | $ | 0.15 | ||||||
Third Quarter | $ | 44.61 | $ | 33.11 | $ | 0.15 | ||||||
Second Quarter | $ | 43.00 | $ | 27.35 | $ | 0.15 | ||||||
First Quarter | $ | 38.95 | $ | 25.69 | $ | 0.15 | ||||||
Fiscal Year Ended December 31, 2008: | ||||||||||||
Fourth Quarter | $ | 59.66 | $ | 24.20 | $ | 0.15 | ||||||
Third Quarter | $ | 90.48 | $ | 56.53 | $ | 0.15 | ||||||
Second Quarter | $ | 90.81 | $ | 67.48 | $ | 0.13 | ||||||
First Quarter | $ | 82.13 | $ | 62.65 | $ | 0.13 | ||||||
Fiscal Year Ended December 31, 2007: | ||||||||||||
Fourth Quarter | $ | 100.29 | $ | 76.39 | $ | 0.13 | ||||||
Third Quarter | $ | 92.10 | $ | 73.65 | $ | 0.13 | ||||||
Second Quarter | $ | 89.95 | $ | 65.68 | $ | 0.13 | ||||||
First Quarter | $ | 74.66 | $ | 62.26 | $ | 0.13 | ||||||
Fiscal Year Ended December 31, 2006: | ||||||||||||
Fourth Quarter | $ | 78.85 | $ | 64.92 | $ | 0.13 | ||||||
Third Quarter | $ | 83.95 | $ | 61.08 | $ | 0.13 | ||||||
Second Quarter | $ | 89.30 | $ | 66.63 | $ | 0.13 | ||||||
First Quarter | $ | 78.33 | $ | 60.60 | $ | 0.13 |
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BJ Services | ||||||||||||
Common Stock | ||||||||||||
Cash Dividends | ||||||||||||
High | Low | Declared | ||||||||||
Fiscal Year Ended September 30, 2010: | ||||||||||||
January 1, 2010 – January 15, 2010 | $ | 21.67 | $ | 18.85 | $ | — | ||||||
October 1, 2009 – December 31, 2009 | $ | 21.59 | $ | 17.57 | $ | 0.05 | ||||||
2009 Fiscal Quarters: | ||||||||||||
July 1, 2009 – September 30, 2009 | $ | 20.06 | $ | 12.00 | $ | 0.05 | ||||||
April 1, 2009 – June 30, 2009 | $ | 17.00 | $ | 9.45 | $ | 0.05 | ||||||
January 1, 2009 – March 31, 2009 | $ | 13.44 | $ | 8.72 | $ | 0.05 | ||||||
October 1, 2008 – December 31, 2008 | $ | 18.91 | $ | 8.34 | $ | 0.05 | ||||||
2008 Fiscal Quarters: | ||||||||||||
July 1, 2008 – September 30, 2008 | $ | 34.94 | $ | 18.12 | $ | 0.05 | ||||||
April 1, 2008 – June 30, 2008 | $ | 33.66 | $ | 26.93 | $ | 0.05 | ||||||
January 1, 2008 – March 31, 2008 | $ | 29.00 | $ | 19.30 | $ | 0.05 | ||||||
October 1, 2007 – December 31, 2007 | $ | 28.79 | $ | 23.12 | $ | 0.05 | ||||||
2007 Fiscal Quarters: | ||||||||||||
July 1, 2007 – September 30, 2007 | $ | 29.52 | $ | 23.48 | $ | 0.05 | ||||||
April 1, 2007 – June 30, 2007 | $ | 31.26 | $ | 27.25 | $ | 0.05 | ||||||
January 1, 2007 – March 31, 2007 | $ | 29.10 | $ | 25.55 | $ | 0.05 | ||||||
October 1, 2006 – December 31, 2006 | $ | 34.14 | $ | 27.43 | $ | 0.05 | ||||||
2006 Fiscal Quarters: | ||||||||||||
July 1, 2006 – September 30, 2006 | $ | 38.01 | $ | 27.87 | $ | 0.05 | ||||||
April 1, 2006 – June 30, 2006 | $ | 41.79 | $ | 31.81 | $ | 0.05 | ||||||
January 1, 2006 – March 31, 2006 | $ | 42.85 | $ | 30.25 | $ | 0.05 |
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• | market reaction to the announcement of the merger and market assessment of the likelihood of the merger being consummated; | |
• | changes in the respective businesses, operations or prospects of Baker Hughes or BJ Services, including Baker Hughes’ and BJ Services’ ability to meet earnings estimates; | |
• | governmental or litigation developments or regulatory considerations affecting Baker Hughes or BJ Services or the energy industry; | |
• | general business, market, industry or economic conditions; | |
• | the worldwide supply/demand balance for oil and gas and the prevailing commodity price environment; | |
• | the level of drilling activity of customers of Baker Hughes and BJ Services; and | |
• | other factors beyond the control of Baker Hughes and BJ Services, including those described elsewhere in this “Risk Factors” section. |
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• | Each executive officer of BJ Services has a severance agreement with BJ Services that provides for severance payments and other benefits if the executive officer’s employment with BJ Services is terminated following a change of control for certain specific reasons. | |
• | The approval and adoption of the merger agreement by BJ Services stockholders will constitute a change of control under the BJ Services incentive plans whether or not the merger is consummated, resulting in the acceleration of outstanding equity awards held by each executive officer and each member of the BJ Services board of directors. In addition, under the BJ Services incentive plans, each holder of such an award, other than a stock option, is also entitled to receive a cash bonus equal to an amount that is a tax gross-up for any applicable federal and state income taxes, as well as excise or other taxes. | |
• | Each executive officer of BJ Services will receive credit for three additional years of service and age for purposes of calculating his or her supplemental executive retirement benefit and the vesting of his or her benefit will be accelerated if the executive officer’s employment with BJ Services is terminated for specified reasons following a change of control. | |
• | Following completion of the merger, J.W. Stewart and James L. Payne, both of whom are currently members of the BJ Services board of directors, will become members of the Baker Hughes board of directors. | |
• | All current directors and officers of BJ Services will continue to be indemnified with respect to acts or omissions occurring prior to closing under existing agreements. |
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• | difficulties in the integration of the operations and personnel of the acquired company, including difficulties in integrating the newly acquired pressure pumping business with other product lines of the combined company across global markets; | |
• | diversion of management’s attention away from other business concerns; and | |
• | the assumption of any undisclosed or other potential liabilities of the acquired company. |
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• | having to pay certain significant costs relating to the merger without receiving the benefits of the merger, including in certain circumstances a termination fee of $175 million to the other party; | |
• | the attention of management of Baker Hughes and BJ Services will have been diverted to the merger rather than each company’s own operations and pursuit of other opportunities that could have been beneficial to that company; and | |
• | resulting negative customer perception could adversely affect the ability of Baker Hughes and BJ Services to compete for, or to win, new and renewal business in the marketplace. |
• | outstanding options to purchase BJ Services common stock would become fully exercisable and subject to accelerated vesting; |
• | vesting restrictions applicable to outstanding performance unit awards and phantom stock awards granted by BJ Services would lapse and such awards would become subject to accelerated vesting; |
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• | in the event of a termination of employment for certain specific reasons within a certain period following such stockholder approval, certain employees with severance agreements would become entitled to certain severance payments and other benefits; | |
• | in the event of a termination of employment for certain specific reasons within a certain period following such stockholder approval, executives entitled to benefits under the BJ Services supplemental executive retirement plan will be given credit for three additional years of service and age for purposes of calculating the benefits to which such executive is entitled and the vesting of such executive’s benefits under the plan will be accelerated; and | |
• | the foregoing effects under the BJ Services incentive plans, severance agreements and supplemental executive retirement plan may make it more difficult for BJ Services to retain certain employees following such stockholder approval, in particular absent the implementation of new retention programs, and may require BJ Services to utilize cash to pay amounts owed under such plans and agreements. |
• | worldwide demand for oil and gas; | |
• | the ability of the Organization of Petroleum Exporting Countries, referred to as OPEC, to set and maintain production levels and pricing; | |
• | the level of production in non-OPEC countries; | |
• | the policies of various governments regarding exploration and development of their oil and gas reserves; | |
• | demand for natural gas in North America; | |
• | advances in exploration and development technology; and | |
• | the worldwide military and political environment, including uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in the Middle East or other geographic areas or further acts of terrorism in the United States, or elsewhere. |
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• | projected operating or financial results; | |
• | the ability to integrate the operations of Baker Hughes and BJ Services; | |
• | the amount and timing of any cost savings synergies or other efficiencies expected to result from the merger; | |
• | prospects for our products and services and expected activity in our areas of operations; | |
• | the effects of competition in our areas of operations; | |
• | the outlook of oil and gas prices; | |
• | the current recession and economic condition and expected trends in the industries we serve; | |
• | the amount, nature and timing of capital expenditures, including future development costs, and availability of capital resources to fund capital expenditures; | |
• | the various risks and other factors considered by the respective boards of Baker Hughes and BJ Services as described under “The Merger — Recommendation of the Baker Hughes Board of Directors and Its Reasons for the Merger” and under “The Merger — Recommendation of the BJ Services Board of Directors and Its Reasons for the Merger”; | |
• | the impact of political and regulatory developments; | |
• | future and pro forma financial condition or results of operations and future revenues and expenses; and | |
• | business strategy and other plans and objectives for future operations. |
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• | the ability to consummate the merger; | |
• | failure, difficulties and delays in obtaining regulatory clearances and approvals for the merger; | |
• | failure, difficulties and delays in achieving expected synergies and cost savings; and | |
• | failure, difficulties and delays in meeting conditions required for closing set forth in the merger agreement. |
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• | that the merger would enhance Baker Hughes’ customer opportunities and service offerings by addressing a gap in Baker Hughes’ product line; | |
• | that the merger would enhance the assets of Baker Hughes and would lead to future business opportunities; | |
• | that the addition of BJ Services’ pressure pumping services would make Baker Hughes more competitive for integrated operations and better able to compete with its largest competitors; | |
• | that the merger would strengthen Baker Hughes’ reservoir expertise; | |
• | the continued strength of the balance sheet of the combined company post-merger in order to maintain business flexibility; | |
• | that Baker Hughes management expects the merger to result in meaningful cost savings and operational synergies, estimated to include approximately $75-$90 million in 2010 and approximately$150-$230 million in 2011; | |
• | the financial analyses reviewed and discussed with the Baker Hughes board of directors and the written opinion of Goldman Sachs to the Baker Hughes board of directors, dated August 30, 2009, to the effect that, as of the date thereof and based on and subject to the factors, assumptions and limitations described therein, the $2.69 in cash and 0.40035 shares of Baker Hughes common stock to be paid by Baker Hughes is fair, from a financial point of view, to Baker Hughes, as more fully described below under the caption “— Opinion of Goldman Sachs;” | |
• | the terms of the merger agreement, the structure of the transaction, including the conditions to each party’s obligation to complete the merger, and the ability of the Baker Hughes board of directors to terminate the agreement under certain circumstances; | |
• | that the merger agreement provides that, under certain circumstances, BJ Services could be required to pay a termination fee of $175 million to Baker Hughes; | |
• | the ability of Baker Hughes and BJ Services to complete the merger, including their ability to obtain the necessary regulatory approvals and their obligations in connection with obtaining those approvals; and | |
• | the merger’s structure, which is expected to constitute a reorganization under section 368(a) of the Code. |
• | information concerning the financial condition, results of operations, prospects and businesses of Baker Hughes and BJ Services provided by management of the companies, including the respective companies’ cash flows from operations, recent performance of common stock and the ratio of Baker Hughes common stock price to BJ Services common stock price over various periods, as well as current industry, economic and market conditions; |
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• | the earnings per share of the common stock and other market factors of both Baker Hughes and BJ Services; and | |
• | the results of Baker Hughes’ business, legal and financial due diligence review of BJ Services. |
• | that there are significant risks inherent in combining and integrating two companies, including that the companies may not be successfully integrated or that the expected synergies from combining the two companies may not be realized, and that successful integration of the companies will require the dedication of significant management resources, which will temporarily detract attention from theday-to-day businesses of the combined company; | |
• | the effects on cash flows from operations and other financial measures under various modeling assumptions, and the uncertainties in timing and execution risk with respect to the anticipated benefits of the merger; | |
• | that Baker Hughes’ exposure to the North American market would increase significantly; | |
• | that the merger agreement provides that, in certain circumstances, Baker Hughes could be required to pay a termination fee of $175 million to BJ Services; | |
• | that the merger might not be completed as a result of a failure to satisfy the conditions contained in the merger agreement, including failure to receive necessary regulatory approvals such as under the HSR Act; | |
• | the possibility of losing key employees and skilled workers as a result of the merger; | |
• | the possibility of customer overlap or that key customers may choose not to do business with the combined company; and | |
• | other matters described under the caption “Risk Factors.” |
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• | the conditions in the oilfield services industry in the United States and worldwide and the business, prospects, financial performance and condition, operations and competitive position of BJ Services on a stand-alone basis as compared to the increased opportunities available to the combined company after giving effect to the merger; | |
• | the opportunity to advance BJ Services’ long-term strategic direction of integrating its current services with additional product lines, expanding its North American customer base and rolling out service offerings on a broader international level; | |
• | advantages to the merger compared with other growth and acquisition strategies considered by the BJ Services board of directors, considering the cost and consummation risk associated with acquisitions, the number of desirable acquisition targets and the execution risk associated with successful integration, in particular on an international level; | |
• | significant continuing equity ownership in the combined company by former stockholders of BJ Services, who will own shares of Baker Hughes common stock representing approximately 27.6% of the then-outstanding shares of Baker Hughes common stock (based on the assumptions described in “Summary — Ownership of Baker Hughes After the Merger”) immediately after the merger and will therefore participate meaningfully in the opportunities for long-term growth of the combined company; | |
• | the formation of a more globally competitive, diversified combined company, with a broader product line; | |
• | meaningful cost savings and operational synergies that may be realized by the combined business going forward; | |
• | advantages of the merger compared with possible alternative business combinations between BJ Services and other third parties, which might, among other considerations, involve increased consummation risk associated with regulatory approvalsand/or acquisition financing or result in a less optimal integrated offering of product lines by the combined entity; | |
• | current financial market conditions and historical market prices, volatility and trading information with respect to BJ Services common stock and Baker Hughes common stock; | |
• | the premium to be received by BJ Services stockholders in the merger, as compared with trading prices of BJ Services common stock before the announcement of the merger; | |
• | the opinion of Greenhill to the BJ Services board of directors, dated August 30, 2009, to the effect that, as of the date of the opinion and based upon and subject to the limitations and assumptions stated in its |
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opinion, the consideration to be received by the holders of BJ Services common stock in the merger is fair, from a financial point of view, to such holders, as more fully described in “— Opinion of Greenhill;” |
• | the opinion of BofA Merrill Lynch Securities, dated August 30, 2009, to the BJ Services board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the consideration to be received in the merger by holders of BJ Services common stock, as more fully described in “— Opinion of BofA Merrill Lynch Securities;” | |
• | the belief of the BJ Services board of directors that the terms of the merger agreement and the structure of the transaction, including the conditions to each party’s obligation to complete the merger, are reasonable; | |
• | the expected ability of Baker Hughes and BJ Services to complete the merger, including their ability to obtain the necessary regulatory approvals and their obligations in connection with obtaining those approvals; | |
• | the provision of the merger agreement that, under certain circumstances, Baker Hughes could be required to pay a termination fee of $175 million to BJ Services; and | |
• | the merger’s structure, which is expected to constitute a reorganization under section 382(a) of the Code. |
• | significant risks inherent in combining and integrating two companies, including that the companies may not be successfully integrated or that the expected synergies from combining the two companies may not be realized, and that successful integration of the companies will require the dedication of significant management resources, which will temporarily detract attention from theday-to-day businesses of the combined company; | |
• | the potential effect of public announcement of the merger on BJ Services’ revenues, operating results, the price of its common stock and its ability to attract and retain customers and key employees; | |
• | because the stock exchange ratio under the merger agreement provides for a fixed number of shares of Baker Hughes common stock, the possibility that BJ Services stockholders could be adversely affected by a decrease in the trading price of Baker Hughes common stock before the closing of the merger, and the fact that the merger agreement does not provide BJ Services with a price-based termination right or other similar protection; | |
• | the limitations imposed in the merger agreement on the solicitation, negotiation or consideration by BJ Services of alternative transactions with third parties; | |
• | the provision of the merger agreement that, in certain circumstances, BJ Services could be required to pay a termination fee of $175 million to Baker Hughes, and this termination fee may discourage other parties from proposing an alternative transaction with BJ Services; | |
• | the risk that the merger might not be completed as a result of a failure to satisfy the conditions contained in the merger agreement, or that completion of the merger might be unduly delayed or subject to conditions that may be imposed by governmental authorities; | |
• | the need to obtain approvals from both Baker Hughes stockholders and BJ Services stockholders in order to complete the transaction; | |
• | the interests that certain directors and executive officers of BJ Services may have with respect to the merger in addition to their interests as stockholders of BJ Services generally, as described in “— Interests of the BJ Services Directors and Executive Officers in the Merger;” and |
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• | other matters described under the caption “Risk Factors.” |
• | the merger agreement; | |
• | annual reports to stockholders and Annual Reports onForm 10-K of Baker Hughes and BJ Services for the five fiscal years ended December 31, 2008, in the case of Baker Hughes, and the five fiscal years ended September 30, 2008, in the case of BJ Services; | |
• | certain interim reports to stockholders and Quarterly Reports onForm 10-Q of Baker Hughes and BJ Services; | |
• | certain other communications from Baker Hughes and BJ Services to their respective stockholders; | |
• | certain publicly available research analyst reports for BJ Services and Baker Hughes; | |
• | certain internal financial analyses and forecasts for BJ Services prepared by its management; | |
• | certain internal financial analyses and forecasts for Baker Hughes prepared by its management, including Case A (Management Base Case) and certain financial analyses and forecasts for BJ Services prepared by |
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the management of Baker Hughes, in each case, as approved by Baker Hughes for use by Goldman Sachs, referred to as the Forecasts; and |
• | certain cost savings and operating synergies projected by the management of Baker Hughes to result from the merger, as prepared by the management of Baker Hughes and approved by Baker Hughes for use by Goldman Sachs, referred to as the Synergies. |
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Implied | ||||
Exchange Ratio | ||||
of BJ Services | ||||
Common Stock | ||||
to Baker Hughes | ||||
Time Period (up to August 28, 2009) | Common Stock | |||
Current | 0.405 | x | ||
30-trading day Average | 0.377 | x | ||
60-trading day Average | 0.375 | x | ||
90-trading day Average | 0.385 | x | ||
1-year Average | 0.359 | x | ||
2-year Average | 0.342 | x |
• | a premium of 16.3% based on the closing market price on August 28, 2009; | |
• | a premium of 22.8% based on the 30-trading day average market price; | |
• | a premium of 25.9% based on 60-trading day average market price; | |
• | a premium of 23.5% based on the 90-trading day average market price; | |
• | a premium of 33.8% based on the1-year average market price; and | |
• | a discount of 11.0% based on the2-year average market price. |
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• | Schlumberger N.V. | |
• | Halliburton Company | |
• | Weatherford International Ltd. | |
• | Smith International, Inc. |
• | Trican Well Services Ltd. | |
• | RPC, Inc. | |
• | Calfrac Well Services Ltd. | |
• | Superior Well Services, Inc. |
• | Enterprise Value, which is the market value of common equity plus the book value of debt, less cash as a multiple of estimated 2009, 2010 and 2011, respectively, earnings before interest, taxes, depreciation and amortization, or EBITDA; | |
• | Price as a multiple of estimated earnings per share, or EPS, for 2009, 2010 and 2011, respectively; and | |
• | Price as a multiple of estimated cash flow per share for 2009, 2010 and 2011, respectively. |
EV/EBITDA | P/E | P/CF | ||||||||||||||||||||||||||||||||||
Company | 2009E | 2010E | 2011E | 2009E | 2010E | 2011E | 2009E | 2010E | 2011E | |||||||||||||||||||||||||||
Baker Hughes (IBES) | 7.2 | x | 6.7 | x | 5.2 | x | 19.7 | x | 19.0 | x | 12.5 | x | 9.2 | x | 8.6 | x | 6.6 | x | ||||||||||||||||||
BJ Services (IBES) | 12.7 | x | 8.9 | x | NA | 90.8 | x | 28.8 | x | NA | 12.4 | x | 9.7 | x | NA | |||||||||||||||||||||
BJ Services (IBES) – Implied Value of Merger Consideration | 14.6 | x | 10.2 | x | NA | 105.5 | x | 33.5 | x | NA | 14.4 | x | 11.2 | x | NA | |||||||||||||||||||||
BJ Services (Management Base Case) – Implied Value of Merger Consideration | 14.1 | x | 9.8 | x | 7.0 | x | 96.5 | x | 34.1 | x | 16.4 | x | 14.7 | x | 11.4 | x | 8.5 | x | ||||||||||||||||||
Oilfield Services Companies | 8.5x- 11.2x | 8.3x- 10.9x | 6.5x- 8.9x | 19.8x- 28.5x | 18.0x- 23.0x | 12.8x- 17.4x | 10.8x- 12.4x | 8.6x- 12.5x | 6.6x- 10.7x | |||||||||||||||||||||||||||
Pressure Pumping Companies | 9.1x- 20.1x | 4.4x- 7.9x | 2.6x- 6.2x | NM | 16.6x- 21.9x* | 5.1x- 13.4x | 7.6x- 29.1x | 3.4x- 8.0x | 4.4x- 8.0x* | |||||||||||||||||||||||||||
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Implied Value per | ||||
Share | ||||
Case A (Management Base Case) | $ | 14.05--$26.54 | ||
Case B | $ | 14.97--$28.24 | ||
Case C | $ | 10.35--$18.79 |
Implied Value per | ||||
Share | ||||
Case A (Management Base Case) | $ | 30.78--$57.84 | ||
Case B | $ | 32.91--$62.37 | ||
Case C | $ | 23.34--$43.83 |
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Discounted Cash Flow | ||
Accretion/(Dilution) | ||
Cases A (Management Base Case) | 0.6%--5.5% | |
Cases B | 0.5%--4.9% | |
Cases C | (0.5)%--4.4% |
Cases A | ||||
Earnings Per Share | (Management | |||
Accretion/(Dilution) | IBES | Base Cases) | ||
2010E EPS | (2.5)% | (6.2)% | ||
2011E EPS | NA | 8.1% |
Cases A | ||||
Cash Flow Per Share | (Management | |||
Accretion/(Dilution) | IBES | Base Cases) | ||
2010E CFPS | 0.1% | (3.1)% | ||
2011E CFPS | NA | 3.0% |
• | National Oilwell, Inc.’s acquisition of Varco International, Inc. announced on August 12, 2004; | |
• | Tenaris S.A.’s acquisition of Maverick Tube Corporation announced on June 12, 2006; | |
• | Compagnie Generale de Geophysique’s acquisition of Veritas DGC Inc. announced on September 5, 2006; | |
• | IPSCO Inc.’s acquisition of NS Group, Inc. announced on September 10, 2006; | |
• | Universal Compression Holdings, Inc.’s acquisition of Hanover Compressor Company announced on February 5, 2007; | |
• | Tenaris S.A.’s acquisition of Hydril Company announced on February 12, 2007; | |
• | United States Steel Corporation’s acquisition of Lone Star Technologies, Inc. announced on March 29, 2007; | |
• | The acquisition of CCS Income Trust by an investor group announced on June 29, 2007; | |
• | National Oilwell Varco, Inc.’s acquisition of Grant Prideco, Inc. announced on December 17, 2007; | |
• | First Reserve Corporation’s acquisition of CHC Helicopter Corporation announced on February 22, 2008; | |
• | Candover Partner Ltd.’s acquisition of Expro International Group PLC announced on April 17, 2008; | |
• | Smith International Inc.’s acquisition of W-H Energy Services, Inc. announced on June 3, 2008; and |
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• | Cameron International Corporation’s acquisition of NATCO Group Inc. announced on June 1, 2009. |
EV/EBITDA | Price/EPS | |||||||||
Selected Transactions | Current | Forward | Current | Forward | 1-Day Premium | |||||
Range | 6.5x-14.2x | 5.3x-13.3x | 9.6x-50.9x | 8.6x-30.0x | 2%-49% | |||||
Mean | 10.2x | 9.0x | 23.0x | 18.2x | 25% | |||||
Median | 9.2x | 8.1x | 19.4x | 18.1x | 22% |
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• | reviewed the draft of the merger agreement presented to the BJ Services board of directors at its meeting on August 30, 2009 and certain related documents; | |
• | reviewed certain publicly available financial statements of BJ Services and Baker Hughes; | |
• | reviewed certain other publicly available business and financial information relating to BJ Services and Baker Hughes that Greenhill deemed relevant; | |
• | reviewed certain information and other data, including financial forecasts, estimates and other financial and operating data concerning BJ Services, prepared by the management of BJ Services, and financial forecasts prepared by research analysts, in each case that the management of BJ Services directed Greenhill to use for purposes of its analyses; |
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• | reviewed certain publicly-available financial forecasts prepared by research analysts concerning Baker Hughes, referred to as the Baker Hughes Street Forecasts; | |
• | reviewed certain financial and operating data for calendar year 2009 concerning Baker Hughes prepared by the management of Baker Hughes; | |
• | discussed the past and present operations and financial condition and the prospects of BJ Services with senior executives of BJ Services; | |
• | discussed the past and present operations and financial condition and the prospects of Baker Hughes with senior executives of Baker Hughes; | |
• | reviewed the historical market prices and trading activity for BJ Services common stock and Baker Hughes common stock and analyzed their implied valuation multiples; | |
• | compared the value of the consideration to be received with that received in certain publicly available transactions that Greenhill deemed relevant; | |
• | compared the value of the consideration to be received with the trading valuations of certain publicly traded companies that Greenhill deemed relevant; | |
• | compared the value of the consideration to be received with the relative contribution of BJ Services to the pro forma combined company based on a number of metrics that Greenhill deemed relevant; | |
• | compared the value of the consideration to be received to the valuation derived by discounting future cash flows and a terminal value of BJ Services at discount rates Greenhill deemed appropriate; | |
• | compared the value of the consideration to be received to research analyst stock price targets for BJ Services and compared such research analyst stock price targets to recent trading prices of Baker Hughes common stock; | |
• | participated in discussions and negotiations among representatives of BJ Services and its legal advisors and representatives of Baker Hughes and its legal and financial advisors; and | |
• | performed such other analyses and considered such other factors as Greenhill deemed appropriate. |
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Implied | ||||||||||||
BJ Services | Baker Hughes | Exchange Ratio | ||||||||||
EBITDA | ||||||||||||
2009 | 18.9 | % | 81.1 | % | 0.249x | |||||||
2010 | 24.1 | % | 75.9 | % | 0.339x | |||||||
2011 | 26.3 | % | 73.7 | % | 0.379x | |||||||
Net Income | ||||||||||||
2009 | 9.3 | % | 90.7 | % | 0.110x | |||||||
2010 | 20.5 | % | 79.5 | % | 0.275x | |||||||
2011 | 25.3 | % | 74.7 | % | 0.362x | |||||||
Cash Flows | ||||||||||||
2009 | 21.0 | % | 79.0 | % | 0.284x | |||||||
2010 | 24.7 | % | 75.3 | % | 0.350x | |||||||
2011 | 23.6 | % | 76.4 | % | 0.329x |
As of August 28, 2009 | Exchange Ratio (a) | |||
Two Year Average | 0.348x | |||
One Year Average | 0.360x | |||
90-Day Trading Average | 0.385x | |||
60-Day Trading Average | 0.375x | |||
30-Day Trading Average | 0.378x | |||
Current (August 28, 2009) | 0.405x | |||
Offer | 0.471x | |||
(a) Historical data is adjusted for dividends and stock splits. |
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Announcement | ||||||||||||
Date | Target | Acquiror | 1-Day | 4-Week | ||||||||
6/10/2008(*) | Grey Wolf Incorporated | Precision Drilling | 8.7 | % | 17.3 | % | ||||||
6/3/2008 | W-H Energy Services, Inc. | Smith International Incorporated | 9.4 | % | 22.9 | % | ||||||
12/17/2007 | Grant Prideco, Inc. | National Oilwell Varco, Inc. | 22.2 | % | 28.2 | % | ||||||
7/23/2007(*) | GlobalSantaFe Corp. | TransOcean Inc. | 0.1 | % | 3.3 | % | ||||||
3/19/2007 | TODCO Inc. | Hercules Offshore | 28.2 | % | 27.5 | % | ||||||
9/5/2006(*) | Veritas DGC Inc. | Compagnie Generale de Geophysique | 20.6 | % | 31.3 | % | ||||||
7/3/2001 | Coflexip SA | Technip | 21.8 | % | 9.5 | % |
(*) | Indicates transactions in which the target’s stockholders retained a 25% to 45% ownership in the combined company following the consummation of the transaction. |
Announcement | ||||||||||||
Date | Target | Acquiror | 1-Day | 4-Week | ||||||||
2/5/2007 | Hanover Compressor Co. | Universal Compression Holdings Co. Inc. | 2.4 | % | 10.1 | % | ||||||
8/12/2004 | Varco International Inc. | National Oilwell Inc. | 9.2 | % | 5.6 | % | ||||||
2/5/2001 | UTI Energy Corp. | Patterson-UTI Energy Incorporated | 8.8 | % | 21.5 | % | ||||||
8/18/2000(*) | R&B Falcon Corp. | Transocean Sedco Forex Inc. | 15.4 | % | 36.5 | % | ||||||
6/19/1998 | Camco International Inc. | Schlumberger Ltd. | 32.6 | % | 19.5 | % | ||||||
5/11/1998(*) | Western Atlas Inc. | Baker Hughes | 21.3 | % | 31.4 | % | ||||||
3/3/1998 | Weatherford Enterra Inc. | EVI Inc. | 39.9 | % | 41.3 | % |
(*) | Indicates transactions in which the target’s stockholders retained a 25% to 45% ownership in the combined company following the consummation of the transaction. |
Target Pro Forma | Number of | Median 1-Day Spot | Median 1-Week Spot | Median 4-Week Spot | ||||||||||||
Ownership | Transactions | Premium | Premium | Premium | ||||||||||||
Less than 10% | 47 | 32.1 | % | 33.4 | % | 32.8 | % | |||||||||
10% to 25% | 70 | 21.2 | % | 24.2 | % | 27.9 | % | |||||||||
Greater than 25% | 118 | 18.1 | % | 21.4 | % | 22.9 | % |
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• | Schlumberger Limited | |
• | Halliburton Company | |
• | Baker Hughes | |
• | Weatherford International Ltd. | |
• | National Oilwell Varco, Inc. | |
• | Smith International, Inc. | |
• | Superior Energy Services, Inc. | |
• | Oil States International, Inc. | |
• | Key Energy Services, Inc. | |
• | Complete Production Services, Inc. | |
• | Basic Energy Services, Inc. | |
• | Cameron International Corporation | |
• | FMC Technologies, Inc. | |
• | Dril-Quip, Inc. |
• | The ratio of enterprise value, which was calculated as diluted equity value based on closing stock prices on August 28, 2009, plus book value of debt, less cash and cash equivalents, as a multiple of estimated EBITDA, in calendar years 2009, 2010 and 2011; | |
• | The ratio of price per share to estimated EPS, for calendar years 2009, 2010 and 2011; and | |
• | The ratio of price per share to estimated cash flow per share, or CFPS, for calendar years 2009, 2010 and 2011. |
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Enterprise Value/ | ||||||||||||||||||||||||
EBITDA | Price/EPS | Price/CFPS | ||||||||||||||||||||||
2010E | 2011E | 2010E | 2011E | 2010E | 2011E | |||||||||||||||||||
Selected Companies | ||||||||||||||||||||||||
High | 12.3x | 10.0x | 23.6x | 24.9x | 16.3x | 13.4x | ||||||||||||||||||
Mean | 8.2x | 6.6x | 17.7x | 14.4x | 8.9x | 7.7x | ||||||||||||||||||
Median | 8.6x | 6.7x | 18.2x | 13.6x | 8.8x | 8.2x | ||||||||||||||||||
Low | 4.6x | 4.6x | 11.1x | 7.7x | 3.9x | 3.1x | ||||||||||||||||||
BJ Services | ||||||||||||||||||||||||
IBES Consensus Estimates at August 28, 2009 Closing Price | 8.2x | 5.9x | 27.7x | 15.1x | 9.8x | 8.2x | ||||||||||||||||||
IBES Consensus Estimates at Mixed Consideration | 9.5x | 6.8x | 32.2x | 17.5x | 11.4x | 9.5x | ||||||||||||||||||
Baker Hughes | ||||||||||||||||||||||||
IBES Consensus Estimates at August 28, 2009 Closing Price | 6.7x | 5.4x | 18.8x | 13.5x | 8.5x | 6.6x |
IBES | Implied EV/ | |||||||||||
Estimate for | EBITDA | Enterprise | Equity | Implied Value | ||||||||
Metric | BJ Services | Range | Valuation | Valuation(1) | Per Share | |||||||
CY 2010E EBITDA | $ | 581.8 | 8.0x–9.0x | $4,654–$5,236 | $4,365–$4,947 | $14.94–$16.93 | ||||||
CY 2011E EBITDA | $ | 808.9 | 6.0x–7.0x | $4,853–$5,662 | $4,564–$5,373 | $15.62–$18.39 |
Implied Range | $14.94–$18.39 | |
Premium/(Discount) to August 28, 2009 Price of $15.43 | (3.2)%–19.2% | |
IBES Estimate | ||||||||
Metric | for BJ Services | Implied P/E Range | Implied Value Per Share | |||||
CY 2010E EPS | $ | 0.56 | 19.0x–28.0x | $10.60–$15.62 | ||||
CY 2011E EPS | $ | 1.02 | 13.0x–16.5x | $13.30–$16.88 |
Implied Range | $10.60–$16.88 | |
Premium/(Discount) to August 28, 2009 Price of $15.43 | (31.3)%–9.4% | |
IBES Estimate | ||||||||
Metric | for BJ Services | Implied P/CFPS Range | Implied Value Per Share | |||||
CY 2010E CFPS | $ | 1.57 | 8.5x–10.5x | $13.36–$16.51 | ||||
CY 2011E CFPS | $ | 1.89 | 7.0x–9.0x | $13.23–$17.01 |
Implied Range | $13.23–$17.01 | |
Premium/(Discount) to August 28, 2009 Price of $15.43 | (14.3)%–10.2% | |
Implied Summary Range | $12.90–$17.40 | |
Implied Exchange Ratio(2) | 0.339x–0.457x | |
(1) | Based on fully diluted share count of 292.1 million shares and net debt of $289.1 million. | |
(2) | Based on Baker Hughes closing share price of $38.09 on August 28, 2009. |
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• | reviewed certain publicly available business and financial information relating to BJ Services and Baker Hughes; | |
• | reviewed certain internal financial and operating information with respect to the business, operations and prospects of BJ Services furnished to or discussed with BofA Merrill Lynch Securities by BJ Services’ management, including certain financial forecasts relating to BJ Services prepared by BJ Services’ management, referred to as the BJ Services management forecasts; | |
• | reviewed certain publicly available financial forecasts relating to Baker Hughes, referred to as the Baker Hughes public forecasts; | |
• | reviewed certain estimates as to the amount and timing of cost savings anticipated by BJ Services’ management to result from the merger, referred to as the cost savings; |
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• | discussed the past and current business, operations, financial condition and prospects of BJ Services with members of BJ Services’ senior management, and discussed the past and current business, operations, financial condition and prospects of Baker Hughes with members of BJ Services’ and Baker Hughes’ senior managements; | |
• | reviewed the potential pro forma financial impact of the merger on the future financial performance of Baker Hughes, including the potential effect on Baker Hughes’ estimated earnings per share and cash flows per share; | |
• | reviewed the trading histories for BJ Services common stock and Baker Hughes common stock and a comparison of such trading histories with each other; | |
• | compared certain financial and stock market information of BJ Services and Baker Hughes with similar information of other companies BofA Merrill Lynch Securities deemed relevant; | |
• | compared certain financial terms of the merger to financial terms, to the extent publicly available, of other transactions BofA Merrill Lynch Securities deemed relevant; | |
• | reviewed the relative financial contributions of BJ Services and Baker Hughes to the future financial performance of the combined company on a pro forma basis; | |
• | reviewed the merger agreement; and | |
• | performed such other analyses and studies and considered such other information and factors as BofA Merrill Lynch Securities deemed appropriate. |
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• | Basic Energy Services, Inc. | |
• | Baker Hughes | |
• | Calfrac Well Services Ltd. | |
• | Complete Production Services, Inc. | |
• | Flint Energy Services Ltd. | |
• | Halliburton Company | |
• | Key Energy Services, Inc. | |
• | RPC, Inc. | |
• | Schlumberger N.V. (Schlumberger Limited) | |
• | Smith International, Inc. | |
• | Superior Well Services, Inc. | |
• | Trican Well Service Ltd. | |
• | Weatherford International Ltd. |
Merger | ||||||
Implied Per Share Equity Value Reference Ranges for BJ Services | Consideration | |||||
2009E EBITDA | 2010E EBITDA | 2011E EBITDA | ||||
$8.66 - $11.07 | $11.79 - $15.44 | $11.77 - $16.87 | ||||
2009E EPS | 2010E EPS | 2011E EPS | ||||
$2.66 - $3.08 | $10.03 - $12.98 | $9.99 - $16.65 | $17.93 | |||
2009E CFPS | 2010E CFPS | 2011E CFPS | ||||
$8.88 - $11.10 | $9.75 - $12.75 | $12.18 - $16.24 |
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Illustrative | ||||||
Implied Exchange Ratio Reference Ranges Based on: | Exchange Ratio | |||||
2009E EBITDA | 2010E EBITDA | 2011E EBITDA | ||||
0.162 - 0.260 | 0.222 - 0.371 | 0.213 - 0.420 | ||||
2009E EPS | 2010E EPS | 2011E EPS | ||||
0.049 - 0.077 | 0.221 - 0.367 | 0.228 - 0.437 | 0.471 | |||
2009E CFPS | 2010E CFPS | 2011E CFPS | ||||
0.187 - 0.268 | 0.212 - 0.306 | 0.250 - 0.404 |
Announcement | ||||||
Date | Acquiror | Target | ||||
• 5/29/09 | • Weatherford International Ltd. | • TNK-BP International Limited (Oilfield Services Division) | ||||
• 11/19/08 | • Superior Well Services, Inc. | • Diamondback Energy Holdings, LLC | ||||
• 9/29/08 | • Basic Energy Services, Inc. | • Azurite Services Company, Inc. | ||||
• 6/3/08 | • Smith International, Inc. | • W-H Energy Services, Inc. | ||||
• 4/3/08 | • Key Energy Services, Inc. | • Western Drilling, LLC | ||||
• 3/12/08 | • Castle Harlan, Inc. | • Anchor Drilling Fluids USA, Inc. | ||||
• 1/31/08 | • Pioneer Drilling Company | • WEDGE Well Services, L.L.C. | ||||
• 9/20/07 | • Key Energy Services, Inc. | • Moncla Well Service, Inc. | ||||
• 7/30/07 | • Oil States International, Inc. | • Schooner Petroleum Services, Inc. | ||||
• 2/2/07 | • Trican Well Service Ltd. | • Liberty Pressure Pumping LP | ||||
• 1/10/07 | • Basic Energy Services, Inc. | • JetStar Consolidated Holdings, Inc. | ||||
• 11/8/06 | • Complete Production Services, Inc. | • Pumpco Services, Inc. | ||||
• 10/18/06 | • Allis-Chalmers Energy Inc. | • Petro-Rentals, Incorporated | ||||
• 5/24/06 | • Leader Energy Services Ltd. | • Cementrite, Inc. | ||||
• 5/14/02 | • Key Energy Services, Inc. | • Q Services, Inc. | ||||
• 2/20/02 | • BJ Services | • OSCA, Inc. |
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Implied Per Share Equity Value | Merger | |||||
Reference Ranges for BJ Services | Consideration | |||||
Latest 12 Months EBITDA | 2010E EBITDA | |||||
$15.99 - $21.65 | $11.79 - $15.44 | $ | 17.93 |
Implied Exchange Ratio | Illustrative | |||||
Reference Ranges Based on: | Exchange Ratio | |||||
Latest 12 Months EBITDA | 2010E EBITDA | |||||
0.322 - 0.540 | 0.237 - 0.385 | 0.471 |
Implied Per Share Equity Value | Merger | |
Reference Range for BJ Services | Consideration | |
$14.89 - $20.52 | $17.93 |
Implied Exchange Ratio | Illustrative | |
Reference Range | Exchange Ratio | |
0.302 - 0.511 | 0.471 |
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• | Halliburton Company | |
• | Schlumberger N.V. (Schlumberger Limited) | |
• | Smith International, Inc. | |
• | Weatherford International Ltd. |
Closing Price of | ||||||
Baker Hughes Common | ||||||
Implied Per Share Equity Value Reference Ranges for Baker Hughes | Stock on August 28, 2009 | |||||
2009E EBITDA | 2010E EBITDA | 2011E EBITDA | ||||
$42.50 - $53.51 | $41.62 - $53.12 | $40.15 - $55.30 | ||||
2009E EPS | 2010E EPS | 2011E EPS | ||||
$39.86 - $53.81 | $35.37 - $45.47 | $38.11 - $43.75 | $38.09 | |||
2009E CFPS | 2010E CFPS | 2011E CFPS | ||||
$41.35 - $47.55 | $41.71 - $46.10 | $40.16 - $48.76 |
Implied Per Share Equity Value | Merger | |
Reference Range for BJ Services | Consideration | |
$10.85 - $15.89 | $17.93 |
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Implied Exchange Ratio | Illustrative | |
Reference Range | Exchange Ratio | |
0.285 - 0.417 | 0.471 |
• | historical trading prices of BJ Services common stock and Baker Hughes common stock during the one-year period and three-year period ended August 28, 2009; | |
• | historical exchange ratios implied by the trading prices of BJ Services common stock and Baker Hughes common stock during the one-year period ended August 28, 2009; | |
• | stock price targets for BJ Services common stock and Baker Hughes common stock as estimated by selected research analysts; and | |
• | premiums paid in selected precedent transactions involving oilfield services companies with transaction values of more than $1.0 billion announced between January 1, 1999 and August 28, 2009. |
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• | J.W. Stewart became a member of the BJ Services board of directors in 1990. Mr. Stewart is Chairman of the board of directors, President and Chief Executive Officer of BJ Services. He joined Hughes Tool Company in 1969 as Project Engineer and served as Vice President — Legal and Secretary of Hughes Tool Company and as Vice President — Operations for a predecessor of BJ Services prior to being named its President in 1986. In 1990, he was also named Chairman and Chief Executive Officer of BJ Services. | |
• | James L. Payne became a member of the BJ Services board of directors in 1999. Mr. Payne has served as Chairman and Chief Executive Officer of Shona Energy Company, Inc. since December 2006 and its predecessor Shona Energy Company, LLC formed in January 2005. Mr. Payne served as Chairman, President and Chief Executive Officer of Nuevo Energy Company from October 2001 until its merger with Plains Exploration and Production Company in May 2004. Mr. Payne served as Chairman and Chief Executive Officer of Santa Fe Energy from 1990 until May 1999, when Santa Fe merged with Snyder Oil Corporation, which also was engaged in the production of oil and gas. Following the merger, he was Chief Executive Officer and then Chief Executive Officer and Chairman of the merged company, Santa Fe Snyder Corporation. Santa Fe Snyder merged with Devon Energy Corporation, which also is engaged in the production of oil and gas, in August 2000, and Mr. Payne was Vice Chairman and a director of Devon through January 2001. Mr. Payne is also a director of Nabors Industries Ltd. and Global Industries, Ltd. |
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Number of Shares | Weighted Average | |||||||||||
Subject to Unvested | Exercise Price | Value of Option | ||||||||||
Name | Options(1) | per Share(2)($) | Acceleration(3)($) | |||||||||
L. William Heiligbrodt | ||||||||||||
Director | 16,001 | 16.47 | 94,296 | |||||||||
John A. Huff | ||||||||||||
Director | 16,001 | 16.47 | 94,296 | |||||||||
Don D. Jordan | ||||||||||||
Director | 16,001 | 16.47 | 94,296 | |||||||||
Michael E. Patrick | ||||||||||||
Director | 16,001 | 16.47 | 94,296 | |||||||||
James L. Payne | ||||||||||||
Director | 16,001 | 16.47 | 94,296 | |||||||||
William H. White | ||||||||||||
Director | 16,001 | 16.47 | 94,296 |
(1) | For each director of BJ Services, this figure represents the number of shares subject to stock options for which there would be accelerated vesting if the BJ Services stockholders approve and adopt the merger agreement on March 1, 2010. Depending upon when the BJ Services stockholders approve and adopt the merger agreement, the actual number of shares for which there is accelerated vesting may be greater than or smaller than this figure. |
(2) | This figure represents the weighted average exercise price per share of the shares subject to stock options for which there would be accelerated vesting if the BJ stockholders approve and adopt the merger agreement on March 1, 2010. |
(3) | This figure represents the estimated value of the acceleration of the options assuming the BJ stockholders approve and adopt the merger agreement on March 1, 2010. To estimate the value of the option acceleration for each director, we multiplied the aggregate number of shares subject to unvested stock options with exercise prices below $21.46 (determined as of March 1, 2010) by $21.46 (the per share closing price of BJ Services common stock on January 15, 2010), and then subtracted the applicable exercise price for the shares. |
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Number of Shares | Weighted Average | |||||||||||
Subject to Unvested | Exercise Price | Value of Option | ||||||||||
Name | Options(1) | per Share(2)($) | Acceleration(3)($) | |||||||||
J.W. Stewart | ||||||||||||
Chairman of the Board, President and Chief Executive Officer | 549,227 | 15.17 | 3,784,713 | |||||||||
David D. Dunlap | ||||||||||||
Executive Vice President and Chief Operating Officer | 271,677 | 15.85 | 1,730,156 | |||||||||
Jeffrey E. Smith | ||||||||||||
Executive Vice President—Finance and Chief Financial Officer | 210,884 | 14.79 | 1,513,885 | |||||||||
Margaret B. Shannon | ||||||||||||
Vice President—General Counsel | 122,567 | 15.53 | 811,017 | |||||||||
Alasdair Buchanan | ||||||||||||
Vice President, International Pressure Pumping Operations | 137,972 | 15.72 | 892,115 | |||||||||
Other BJ Services Executive Officers (6 people) | 461,319 | 15.83 | 2,946,690 |
(1) | For each executive officer, this figure represents the number of shares subject to stock options for which there would be accelerated vesting if the BJ Services stockholders approve and adopt the merger agreement on March 1, 2010. Depending upon when the BJ Services stockholders approve and adopt the merger agreement, the actual number of shares for which there is accelerated vesting may be greater than or smaller than this figure. |
(2) | This figure represents the weighted average exercise price per share of the shares subject to stock options for which there would be accelerated vesting if the BJ stockholders approve and adopt the merger agreement on March 1, 2010. |
(3) | This figure represents the estimated value of the acceleration of the options assuming the BJ stockholders approve and adopt the merger agreement on March 1, 2010. To estimate the value of the option acceleration for each executive officer, we multiplied the aggregate number of shares subject to unvested stock options with exercise prices below $21.46 (determined as of March 1, 2010) by $21.46 (the per share closing price of BJ Services common stock on January 15, 2010), and then subtracted the applicable exercise price for the shares. |
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Number of Shares | Value of Phantom Stock | |||
Subject to Phantom | Award Acceleration(2) | |||
Name | Stock Awards(1) | ($) | ||
L. William Heiligbrodt | 8,000 | 171,680 | ||
Director | ||||
John A. Huff | 8,000 | 171,680 | ||
Director | ||||
Don D. Jordan | 8,000 | 171,680 | ||
Director | ||||
Michael E. Patrick | 8,000 | 171,680 | ||
Director | ||||
James L. Payne | 8,000 | 171,680 | ||
Director | ||||
William H. White | 8,000 | 171,680 | ||
Director |
(1) | For each director, this figure represents the number of shares subject to phantom stock awards for which there would be accelerated vesting if the BJ stockholders approve and adopt the merger agreement on March 1, 2010. Depending upon when the BJ Services stockholders approve and adopt the merger agreement, the actual number of shares for which there is accelerated vesting may be greater than or smaller than this figure. |
(2) | This figure represents the estimated value of the acceleration of the phantom stock awards assuming that the BJ stockholders approve and adopt the merger agreement on March 1, 2010. To estimate the value of the phantom stock award acceleration for each director, we multiplied the aggregate number of shares subject to unvested phantom stock awards (determined as of March 1, 2010) by $21.46 (the per share closing price of BJ Services common stock on January 15, 2010). |
Number of | ||||||||||||||||||||
Number of | Shares | Cash Bonus | ||||||||||||||||||
Shares Subject | Subject to | (Tax | Value of Equity | Total | ||||||||||||||||
to Performance | Phantom Stock | Gross-up)(2) | Acceleration(3) | Value(4) | ||||||||||||||||
Name | Unit Awards(1) | Awards(1) | ($) | ($) | ($) | |||||||||||||||
J.W. Stewart | ||||||||||||||||||||
Chairman of the Board, President and Chief Executive Officer | 293,075 | 114,346 | 5,014,818 | 8,743,255 | 13,758,073 | |||||||||||||||
David D. Dunlap | ||||||||||||||||||||
Executive Vice President and Chief Operating Officer | 144,656 | 54,533 | 2,451,755 | 4,274,596 | 6,726,351 | |||||||||||||||
Jeffrey E. Smith | ||||||||||||||||||||
Executive Vice President — Finance and Chief Financial Officer | 112,665 | 44,772 | 1,937,841 | 3,378,598 | 5,316,439 | |||||||||||||||
Margaret B. Shannon | ||||||||||||||||||||
Vice President — General Counsel | 65,328 | 25,037 | 1,112,275 | 1,939,233 | 3,051,508 | |||||||||||||||
Alasdair Buchanan | ||||||||||||||||||||
Vice President, International Pressure Pumping Operations | 73,493 | 27,887 | 1,247,854 | 2,175,615 | 3,423,469 | |||||||||||||||
Other BJ Services Executive Officers (6 people) | 245,650 | 92,723 | 4,164,927 | 7,261,485 | 11,426,412 |
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(1) | For each executive officer, this figure represents the number of shares subject to performance unit awards and phantom stock awards for which there would be accelerated vesting if the BJ stockholders approve and adopt the merger agreement on March 1, 2010. The performance unit awards represent the number of shares at the over-achievement level of performance (or 1331/3% of the grant). Depending upon when the BJ Services stockholders approve and adopt the merger agreement, the actual number of shares for which there is accelerated vesting may be greater than or smaller than this figure. |
(2) | This figure represents the estimated cash bonus taxgross-up payments that would be made with respect to the shares subject to the unvested awards if the BJ stockholders approve and adopt the merger agreement on March 1, 2010. Depending upon when the BJ Services stockholders approve and adopt the merger agreement, the actual amount of the cash bonus may be greater than or smaller than this figure. |
(3) | This figure represents the estimated value of the acceleration of the performance unit awards and phantom stock awards assuming that the BJ stockholders approve and adopt the merger agreement on March 1, 2010. To estimate the value of the award acceleration for each executive officer, we multiplied the aggregate number of shares subject to unvested performance unit awards and phantom stock awards (determined as of March 1, 2010) by $21.46 (the per share closing price of BJ Services common stock on January 15, 2010). |
(4) | For each executive officer, this figure represents the total of the cash bonus taxgross-up payment that would be made with respect to the shares subject to the unvested awards and the value of equity acceleration assuming that the BJ stockholders approve and adopt the merger agreement on March 1, 2010. The performance unit awards in the table above are calculated at the over-achievement level of performance (or 1331/3%). Depending upon when the BJ Services stockholders approve and adopt the merger agreement, the actual total amount may be greater than or smaller than this figure. |
• | the company terminates his or her employment for any reason, other than for death, disability or for cause, | |
• | the executive officer terminates his or her employment for “good reason” (as this term is defined in the agreements) or | |
• | the executive officer terminates his or her employment without good reason with the consent of the BJ Services board of directors. |
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Value of | ||||||||||||||||||||||||
Incentive | Welfare and | Estimated | ||||||||||||||||||||||
Severance | Pro-Rata | Award | Outplacement | Excise Tax | ||||||||||||||||||||
Payment | Bonus | Payment | Benefits | Gross-up | Total | |||||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||
J.W. Stewart | ||||||||||||||||||||||||
Chairman of the Board, President and Chief Executive Officer | 7,290,000 | 505,973 | 25,200,000 | 220,779 | 18,198,016 | 51,414,768 | ||||||||||||||||||
David D. Dunlap | ||||||||||||||||||||||||
Executive Vice President and Chief Operating Officer | 3,429,000 | 211,551 | 11,520,000 | 89,571 | 11,673,697 | 26,923,819 | ||||||||||||||||||
Jeffrey E. Smith | ||||||||||||||||||||||||
Executive Vice President — Finance and Chief Financial Officer | 3,024,000 | 186,564 | 10,080,000 | 79,018 | 10,083,447 | 23,453,029 | ||||||||||||||||||
Margaret B. Shannon | ||||||||||||||||||||||||
Vice President — General Counsel | 2,218,500 | 126,805 | 5,400,000 | 54,867 | 5,177,574 | 12,977,746 | ||||||||||||||||||
Alasdair Buchanan | ||||||||||||||||||||||||
Vice President, International Pressure Pumping Operations | 2,167,500 | 123,890 | 5,940,000 | 66,321 | 5,902,412 | 14,200,123 | ||||||||||||||||||
Other BJ Services Executive Officers (6 people) | 8,951,850 | 468,056 | 19,620,000 | 483,557 | 21,511,013 | 51,034,476 |
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Name | SERP Value ($)(1) | |||
J.W. Stewart Chairman of the Board, President and Chief Executive Officer | 0 | |||
David D. Dunlap Executive Vice President and Chief Operating Officer | 2,985,240 | |||
Jeffrey E. Smith Executive Vice President — Finance and Chief Financial Officer | 2,509,030 | |||
Margaret B. Shannon Vice President — General Counsel | 533,288 | |||
Alasdair Buchanan Vice President, International Pressure Pumping Operations | 470,161 | |||
Other BJ Services Executive Officers (6 People) | 5,845,759 |
(1) | Both Mr. Stewart and Ms. Shannon are fully vested in the Supplemental Executive Retirement Plan. The amount shown for each of them is the incremental present value over their normal retirement benefit. |
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• | an individual who is a citizen or resident of the United States (including certain former citizens and former long-term residents); | |
• | a corporation, or other entity taxable as a corporation for U.S. federal tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia; | |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | |
• | a trust (i) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in section 7701(a)(30) of the Code or (ii) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person. |
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• | the amount of cash received pursuant to the merger (excluding any cash received in lieu of fractional shares of Baker Hughes common stock), and |
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• | the amount, if any, by which the sum of the fair market value of the shares of Baker Hughes common stock as of the effective time of the merger and the amount of cash received pursuant to the merger for those BJ Services shares exceeds his adjusted tax basis in those BJ Services shares. |
• | reduced by the amount of cash received in the merger by him for those BJ Services shares (excluding any cash received in lieu of a factional share of Baker Hughes common stock); and | |
• | increased by the amount of gain (including the portion of this gain that is treated as a dividend as described above) recognized by him in the merger (excluding any gain recognized as a result of cash received in lieu of a fractional share of Baker Hughes common stock). |
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• | corporate existence, good standing and qualification to conduct business; | |
• | capitalization; | |
• | corporate power and authorization to enter into and carry out the obligations under the merger agreement and the enforceability of the merger agreement; |
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• | absence of any conflict or violation of organizational documents, third party agreements or law or regulation as a result of entering into and carrying out the obligations under the merger agreement; | |
• | governmental and regulatory approvals or consents required to complete the merger; | |
• | filings and reports with the SEC, financial statements, internal controls and disclosure controls and procedures; | |
• | absence of a material adverse effect or material damage, destruction or other casualty loss material to a party’s business in each case since October 1, 2008; | |
• | absence of litigation or outstanding judgments or orders; | |
• | accuracy of the information supplied for inclusion in this joint proxy statement/prospectus; | |
• | absence of undisclosed liabilities; | |
• | broker’s or finder’s fees; | |
• | employee benefit plans and compliance with the Employee Retirement Income Security Act of 1976, as amended; | |
• | recommendation of the merger by board of directors and required stockholder vote; | |
• | tax matters; | |
• | environmental matters; | |
• | compliance with laws; | |
• | investment company status; | |
• | intellectual property; | |
• | insurance; | |
• | material contracts; | |
• | customers and suppliers; | |
• | certain business practices and compliance with anti-corruption and money laundering laws; | |
• | affiliate transactions; and | |
• | takeover laws. |
• | indebtedness; | |
• | subsidiaries; | |
• | labor and employment matters; | |
• | title to properties; and | |
• | the BJ Services rights agreement. |
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• | a change in law or GAAP, or interpretations thereof; | |
• | general economic, market, industry or political conditions (including acts of terrorism or war or other force majeure events); | |
• | any change in the stock price, trading volume or credit rating of such party (unless due to a circumstance which would separately constitute a material adverse effect); | |
• | the announcement or pendency of the merger agreement, any actions taken in compliance with the merger agreement or the consummation of the merger; | |
• | acts of God, earthquakes or similar catastrophes, any weather related event or any outbreak of illness or other public health event; or | |
• | the failure of such party to meet internal or analysts’ expectations, projections or budgets (unless due to a circumstance which would separately constitute a material adverse effect). |
• | approval and adoption by BJ Services stockholders of the merger agreement; | |
• | approval by Baker Hughes stockholders of the issuance of Baker Hughes common stock pursuant to the merger agreement; | |
• | the waiting period (and any extension thereof) applicable to the consummation of the merger under the HSR Act andnon-U.S. antitrust or competition merger control statutes will have expired or been terminated; | |
• | the absence of any law, injunction, judgment, order or decree of any governmental entity which prohibits or permanently enjoins the consummation of the merger; | |
• | the effectiveness of theForm S-4 registration statement, of which this joint proxy statement/prospectus constitutes a part, and the absence of any stop order suspending the effectiveness of theForm S-4 or proceedings for such purpose pending before or threatened by the SEC; and | |
• | shares of Baker Hughes common stock issuable to the stockholders of BJ Services pursuant to the merger agreement will have been approved for listing on the NYSE, subject to official notice of issuance. |
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• | (a) certain representations and warranties of BJ Services set forth in the merger agreement with respect to its capitalization will be true and correct as of the date of the merger agreement and the closing date of the merger, as though made as of such date (except to the extent expressly made as of an earlier date), and (b) all other representations and warranties of BJ Services set forth in the merger agreement will be true and correct as of the date of the closing date of the merger as though made as of such date (except to the extent expressly made as of an earlier date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth in the merger agreement) individually or in the aggregate has not had, and would not reasonably be expected to have, a material adverse effect on BJ Services; | |
• | the performance in all material respects by BJ Services of its obligations contained in the merger agreement; | |
• | the receipt by Baker Hughes of an opinion of its counsel, dated the closing date of the merger, to the effect that the merger will qualify as a reorganization under section 368(a) of the Code and that BJ Services and Baker Hughes will each be a “party to the reorganization” within the meaning of section 368 of the Code; | |
• | the delivery by BJ Services to Baker Hughes of an officer’s certificate, dated the closing date of the merger, certifying to the effect that certain closing conditions have been satisfied and confirming resolutions by BJ Services’ executive compensation committee; and | |
• | the number of appraisal shares for which demands for appraisal have not been withdrawn will not exceed 15% of the outstanding shares of BJ Services common stock. |
• | (a) certain representations and warranties of Baker Hughes and Merger Sub set forth in the merger agreement with respect to Baker Hughes’ capitalization will be true and correct as of the date of the merger agreement and the closing date of the merger, as though made as of such date (except to the extent expressly made as of an earlier date), and (b) all other representations and warranties of Baker Hughes and Merger Sub set forth in the merger agreement will be true and correct as of the date of the closing date of the merger as though made as of such date (except to the extent expressly made as of an earlier date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth in the merger agreement) individually or in the aggregate has not had, and would not reasonably be expected to have, a material adverse effect on Baker Hughes; | |
• | the performance in all material respects by Baker Hughes and Merger Sub of their respective obligations contained in the merger agreement; | |
• | the receipt by BJ Services of an opinion of its counsel, dated the closing date of the merger, to the effect that the merger will qualify as a reorganization under section 368(a) of the Code and that BJ Services and Baker Hughes will each be a “party to the reorganization” within the meaning of section 368 of the Code; and | |
• | the delivery by Baker Hughes to BJ Services of an officer’s certificate, dated the closing date of the merger, certifying to the effect that certain closing conditions have been satisfied. |
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• | conduct the business of BJ Services and its subsidiaries only in the ordinary course of business consistent with past practices and use reasonable best efforts to maintain their assets and preserve intact their business organization and relationships with third parties and to keep the services of their present key officers and employees; and | |
• | except as previously disclosed to Baker Hughes, as contemplated by the merger agreement, as required by applicable law and intercompany transactions in the ordinary course of business consistent with past practices, BJ Services will not, and will not permit any of its subsidiaries to: |
• | except for purchases and dispositions of inventory and consumables in the ordinary course of business consistent with past practices and for capital spending permitted under the merger agreement, acquire, sell, lease, transfer or dispose of any assets, rights or securities of BJ Services or its subsidiaries outside of the ordinary course of business in excess of $20 million in a single transaction or series of related transactions or terminate, cancel, materially modify or enter into any material commitment, transaction, line of business or other agreement outside the ordinary course of business; | |
• | acquire any business, corporation, partnership, association or other business organization or division; | |
• | enter into any material partnership, joint venture agreement or similar arrangement; | |
• | amend or propose to amend the certificate of incorporation or bylaws of BJ Services, BJ Services Company, USA or BJ Services International S.a.r.l., or the respective constituent documents of any other material subsidiary; | |
• | except for quarterly cash dividends consistent with the amount paid in past quarters, declare, set aside or pay any dividend or other distribution, make any other actual, constructive or deemed distribution in respect of its capital stock or otherwise make any payments to stockholders in their capacity as such; | |
• | purchase or redeem, or offer to purchase or redeem, any shares of its capital stock, other equity securities, other ownership interests or any options, warrants or rights to acquire any such stock, securities or interests, other than in connection with the relinquishment of shares by employees and directors of BJ Services in payment of withholding tax upon the vesting of stock options, or phantom stock, or forfeiture of shares due to termination of employment; | |
• | split, combine or reclassify any outstanding shares of its capital stock; | |
• | issue, sell, dispose of any shares of, or any options, warrants or rights of any kind to acquire any shares of, or any securities convertible into or exchangeable for any shares of, its capital stock of any class; | |
• | modify the terms of any existing indebtedness for borrowed money or security issued by BJ Services or any of its subsidiaries having an aggregate principal amount in excess of $50 million; | |
• | (a) incur, assume, guarantee or become obligated with respect to any indebtedness for borrowed money, if the aggregate amount would exceed $100 million in the aggregate at any given time (excluding intercompany debt), provided that no amounts will be outstanding under BJ Services’ credit agreement immediately prior to closing of the merger, or any indebtedness for borrowed money which contains covenants that materially restrict the merger or is not in the ordinary course of business and |
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consistent with past practices, (b) make any individual loan, advance or capital contribution to or investment in excess of $5 million in any other person, (c) pledge or otherwise encumber its shares of capital stock, (d) mortgage or pledge any of its material assets (other than currently existing liens and certain permitted liens) of $5 million or more in the aggregate, or (e) incur indebtedness, fund or prepay any obligations to any person, that are not due and payable until after closing of the merger, unless in the ordinary course of business consistent with past practices or as previously disclosed to Baker Hughes; |
• | propose any material change in capitalization of $5 million or more with respect to any given subsidiary of BJ Services (other than BJ Services Company, USA) per fiscal quarter; | |
• | except to the extent required by law, by any BJ Services benefit plan or contracts as in effect on the date of the merger agreement or as required or contemplated by the merger agreement, (a) subject to certain specified exceptions, increase the compensation or benefits of any of its employees, officers, directors, consultants, independent contractors or service providers except in the ordinary course of business consistent with past practice, provided that no additional equity or equity-based grants will be made, (b) make a payment of any pension, severance or retirement benefits to any such individual, (c) enter into, materially amend or otherwise commit itself to any new benefit plan for the benefit of any such individual, (d) terminate any BJ Services benefit plan, (e) accelerate the vesting of, or the lapsing of restrictions with respect to, any options or other stock-based compensation, (f) accelerate the vesting or payment of any compensation or benefit under any BJ Services benefit plan, (g) cause the funding of any rabbi trust or similar arrangement or take any action to fund or in any other way secure the payment of compensation or benefits under any BJ Services benefit plan, (h) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any BJ Services benefit plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP or applicable law, (i) subject to certain specified exceptions, award any new bonuses or bonus opportunities, (j) increase the benefits or compensation of any past or present directors or executive officers, or (k) enter into, renew, or materially modify a collective bargaining or similar agreement; | |
• | hire or terminate the employment or contractual relationship of any officer, employee or consultant, other than hirings or terminations in the ordinary course, consistent with existing policies and past practices; | |
• | other than as required by existing employee benefit plans or employment agreements or by applicable law, execute or amend in any material respect any consulting or indemnification agreement with any director, officer, agent, consultant or employee, or any material collective bargaining agreement or other material obligation to any labor organization or employee; | |
• | enter into or amend any agreement with any agent, sales representative or similar person; | |
• | transfer or license to any person or entity or otherwise extend, amend or modify any rights to the intellectual property of BJ Services necessary to carry on BJ Services’ business in all material respects; | |
• | except in the ordinary course of business consistent with past practice, make any changes in its reporting for taxes or accounting methods other than as required by GAAP or applicable law; make or rescind any tax election or file any material amended tax return; make any change to its method of reporting income, deductions, or other tax items for tax purposes; settle or compromise any tax liability; or enter into any transaction with an affiliate outside the ordinary course of business if such transaction would give rise to a material tax liability; | |
• | unless otherwise permitted pursuant to the merger agreement, enter into, amend or terminate any “material contract,” as such term is used in the merger agreement; | |
• | other than with respect to any tax liabilities, waive, release, assign, settle, compromise or otherwise |
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resolve any investigation, claim, action, litigation or other legal proceedings, except where such waivers, releases, assignments, settlements or compromises involve only the payment of monetary damages not in excess of $5 million individually with respect to personal injury matters and $1 million individually with respect to labor claims and $10 million in the aggregate as to all other matters (excluding amounts to be paid under existing insurance policies) or otherwise pay, discharge or satisfy any claims, liabilities or obligations in excess of such amount, in each case, other than in the ordinary course consistent with past practice. Notwithstanding the foregoing, BJ Services and its subsidiaries agreed not to resolve any toxic tort or governmental entity matter without approval of Baker Hughes, and to provide Baker Hughes advance notice, the opportunity to participate in any discussions with any U.S. government agency or at Baker Hughes’ election, a comprehensive review of all discussions regarding compliance issues or potential compliance issues. Prior to the closing of the merger, Baker Hughes and BJ Services will jointly consider in good faith whether and, if so, how to disclose or attempt to resolve any issues with the U.S. government agency; |
• | make or commit to make capital expenditures in excess of the aggregate budgeted amount set forth in the BJ Services’ fiscal 2009 through June 2010 capital expenditure plan previously provided to Baker Hughes; | |
• | make or assume any hedge agreements; | |
• | enter into any agreement that materially limits or otherwise materially restricts BJ Services or any of its subsidiaries, or that would reasonably be expected to, after the effective time of the merger, materially limit or restrict Baker Hughes or any of its subsidiaries, from engaging or competing in any line of business in which it is currently engaged or in any geographic area material to the business or operations of Baker Hughes or any of its subsidiaries; | |
• | adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of BJ Services, BJ Services Company, USA, BJ Services International S.a.r.l. or of any other subsidiary of BJ Services that is material to the business of BJ Services and any of its subsidiaries taken as a whole; | |
• | take any action that would reasonably be expected to result in (a) any inaccuracy of a representation or warranty in the merger agreement that would allow for a termination of the merger agreement, or (b) cause any of the conditions precedent to the transactions contemplated by the merger agreement to fail to be satisfied; | |
• | enter into any contract or agreement (or related series of contracts or agreements) valued at an amount greater than $25 million; or | |
• | take or agree in writing to take any of the actions precluded by the foregoing. |
• | conduct the business of Baker Hughes and its subsidiaries only in the ordinary course of business consistent with past practices, and use reasonable best efforts to maintain their assets and preserve intact their business organization and relationships with third parties and to keep the services of their present key officers and employees; and |
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• | except as previously disclosed to BJ Services, as contemplated by the merger agreement, as required by applicable law and intercompany transactions in the ordinary course of business consistent with past practices, Baker Hughes will not, and will not permit any of its subsidiaries to: |
• | acquire any business, corporation, partnership or other business organization or division, if such transaction would prevent or materially delay the consummation of the transactions contemplated by the merger agreement; | |
• | except for quarterly cash dividends consistent with the amount paid in past quarters, declare, set aside or pay any dividend or other distribution, make any other actual, constructive or deemed distribution in respect of its capital stock or otherwise make any payments to stockholders in their capacity as such; | |
• | adopt or propose to adopt any amendments to its charter documents which would have a material adverse impact on the consummation of the transactions contemplated by the merger agreement; | |
• | take any action that would reasonably be expected to result in (a) any inaccuracy of a representation or warranty in the merger agreement that would allow for a termination of the merger agreement, or (b) cause any of the conditions precedent to the transactions contemplated by the merger agreement to fail to be satisfied; | |
• | take any action, cause any action to be taken, knowingly fail to take any action or knowingly fail to cause any action to be taken, which action or failure to act would prevent or impede, or would be reasonably likely to prevent or impede, the merger from qualifying as a reorganization within the meaning of section 368(a) of the Code; | |
• | adopt a plan of complete or partial liquidation or dissolution of Baker Hughes or any of its material subsidiaries; or | |
• | take or agree in writing to take any of the actions precluded by the foregoing. |
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• | the Baker Hughes board of directors determines in good faith, after consultation with Baker Hughes’ outside legal counsel and financial advisors, that its failure to take such action would be reasonably expected to be inconsistent with its fiduciary duties under applicable laws; | |
• | the Baker Hughes board of directors provides BJ Services with at least three business days’ advance written notice of its intention to make a change in its recommendation, specifying the material events giving rise thereto; and | |
• | during such period, Baker Hughes and its representatives will negotiate in good faith with BJ Services and its representatives to amend the merger agreement so as to enable the Baker Hughes board of directors to proceed with its recommendation and at the end of such period, the Baker Hughes board of directors maintains its determination to change its recommendation (after taking into account any agreed modification to the terms of the merger agreement). |
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• | solicit, initiate or knowingly and intentionally encourage or facilitate (including by way of furnishing information), or engage in discussions or negotiations regarding, any inquiry, proposal or offer, or the making, submission or announcement of any inquiry, proposal or offer (including any inquiry, proposal or offer to its stockholders) which constitutes or would be reasonably expected to lead to an alternative proposal; | |
• | except for confidentiality agreements described below or a definitive agreement entered into or to be entered into concurrently with a termination of the merger agreement by BJ Services in accordance with the merger agreement, approve or enter into a letter of intent, memorandum of understanding or other contract with any person, other than Baker Hughes and Merger Sub, for, constituting or otherwise relating to an alternative proposal; | |
• | provide or cause to be provided any information or data relating to BJ Services or any of its subsidiaries in connection with, or in response to, any alternative proposal by any person; or | |
• | terminate, amend, waive or permit the waiver of any voting restriction contained in the organizational or governing documents of BJ Services, or take any action contemplated by paragraph (1) of Article Fourteenth of BJ Services’ certificate of incorporation or by paragraph (a)(1) of Section 203 of the Delaware General Corporation Law, referred to as the DGCL. |
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• | the BJ Services board of directors determines in good faith, after consultation with BJ Services’ outside legal counsel and financial advisors, that its failure to take such action would be reasonably expected to be inconsistent with its fiduciary duties under applicable laws; | |
• | the BJ Services board of directors provides Baker Hughes with at least three business days’ advance written notice of its intention to make a change in its recommendation, specifying the material events giving rise thereto; and | |
• | during such three business day period, BJ Services and its representatives, if requested by Baker Hughes, negotiate in good faith with Baker Hughes and its representatives to amend the merger agreement so as to enable the BJ Services board of directors to proceed with its recommendation and at the end of such three business day period, the BJ Services board of directors maintains its determination to change its recommendation (after taking into account any agreed modifications to the terms of the merger agreement). |
• | for a merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or any similar transaction or series of transactions involving BJ Services (or |
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any of its subsidiaries whose business constitutes 15% or more of the net revenues, net income or assets of BJ Services and its subsidiaries, taken as a whole); |
• | for the issuance by BJ Services of 15% or more of its equity securities; or | |
• | to acquire in any manner, directly or indirectly, 15% or more of the equity securities or consolidated total assets of BJ Services and its subsidiaries. |
• | which provides that 100% of BJ Services’ outstanding equity securities will be converted into, exchanged for or otherwise cancelled in exchange for the right to receive consideration that does not constitute 50% or more of the outstanding equity securities of the acquiring or surviving entity or its ultimate parent; or | |
• | providing for the sale of all or substantially all of BJ Services’ assets, in either case on terms which the BJ Services board of directors determines in its good faith judgment, after consultation with BJ Services’ outside counsel and financial advisors, would, if consummated, result in a transaction more favorable from a financial point of view to the holders of BJ Services common stock than the merger (or any bona fide written offer or proposal made by Baker Hughes in response to such alternative proposal or otherwise), taking into account all the terms and conditions of such alternative proposal and the merger agreement (including any conditions to and expected timing of consummation thereof, and all legal, financial and regulatory aspects of such alternative proposal and the merger agreement). |
• | by mutual written consent of Baker Hughes and BJ Services; | |
• | by either Baker Hughes or BJ Services upon written notice to the other if: |
• | the merger is not completed on or before March 1, 2010 (or such later date as may be permitted under the merger agreement in connection with obtaining a quorum at either party’s special meeting or for dissemination of supplemental or amended disclosure to this joint proxy statement/prospectus), unless a breach by the party seeking to terminate the merger agreement of its obligations under the merger agreement has proximately caused the failure of the merger to be completed on or before this date, referred to herein as the termination date, except that if the waiting period under the HSR Act (and any extension thereof) has not expired or been terminated by such date, either Baker Hughes or BJ Services may unilaterally extend the termination date until May 1, 2010; | |
• | any injunction, judgment, order or decree prohibiting or permanently enjoining the closing of the merger is in effect and has become final and nonappealable, provided that the party seeking to terminate the merger agreement on such grounds has used its reasonable best efforts to resist, lift or resolve such injunction, judgment, order or decree; | |
• | the BJ Services stockholders fail to approve and adopt the merger agreement at the BJ Services special meeting; or | |
• | the Baker Hughes stockholders fail to approve the issuance of shares of Baker Hughes common stock pursuant to the merger agreement at the Baker Hughes special meeting; |
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• | by BJ Services if: |
• | Baker Hughes or Merger Sub has breached or failed to perform any of its representations, warranties, covenants or other agreements contained in the merger agreement, which breach or failure to perform (a) would give rise to the failure of a related condition to closing of the merger and (b) is incapable of being cured prior to the termination date or is not cured by Baker Hughes or Merger Sub within 30 days following receipt of written notice from BJ Services of such breach or failure to perform; | |
• | prior to the approval and adoption by BJ Services stockholders of the merger agreement, (a) the BJ Services board of directors has received a superior proposal, (b) BJ Services has not violated the no solicitation provisions of the merger agreement with respect to such superior proposal and has previously paid (or concurrently pays) the termination fee described below, (c) the BJ Services board of directors has provided Baker Hughes with at least five business days’ advance written notice of its intention to terminate and substantially simultaneously provided Baker Hughes with a copy of the definitive agreement providing for the implementation of such superior proposal and (d) the BJ Services board of directors has approved, and BJ Services concurrently enters into, such definitive agreement providing for the implementation of such superior proposal; or | |
• | the Baker Hughes board of directors changes its recommendation as described in “ — Additional Agreements — Stockholders’ Meetings.” |
• | by Baker Hughes if: |
• | BJ Services has breached or failed to perform any of its representations, warranties, covenants or other agreements contained in the merger agreement, which breach or failure to perform (a) would give rise to the failure of a related condition to closing of the merger and (b) is incapable of being cured prior to the termination date or is not cured by BJ Services within 30 calendar days after written notice has been given by Baker Hughes to BJ Services of such breach or failure to perform; | |
• | prior to the approval by the Baker Hughes stockholders of the issuance of Baker Hughes common stock to the BJ Services stockholders in connection with the merger, (a) the Baker Hughes board of directors has received a “Baker Hughes superior proposal,” as defined below, (b) Baker Hughes has previously paid (or concurrently pays) the termination fee described below, (c) the Baker Hughes board of directors has provided BJ Services with at least five business days’ advance written notice of its intention to terminate and substantially simultaneously provided BJ Services with a copy of the definitive agreement providing for the implementation of such Baker Hughes superior proposal, (d) such definitive agreement contains a provision making consummation of such Baker Hughes superior proposal conditioned upon the prior termination of the merger agreement and (e) the Baker Hughes board of directors has approved, and Baker Hughes concurrently enters into, such definitive agreement providing for the implementation of such Baker Hughes superior proposal; | |
• | the BJ Services board of directors changes its recommendation as described in “ — Additional Agreements — BJ Services’ Ability to Make a Change in its Recommendation”; or | |
• | BJ Services has breached or failed to perform in any material respect any of its obligations under the no solicitation provisions of the merger agreement as described in “ — Additional Agreements — No Solicitation of Alternative Transactions.” |
• | (a) an alternative proposal has been publicly proposed or disclosed prior to, and not withdrawn at the time of, the special meeting of the BJ Services stockholders and thereafter, (b) the merger agreement is |
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terminated by BJ Services or Baker Hughes because the BJ Services stockholders do not approve and adopt the merger agreement, and (c) within twelve months after the date the merger agreement is terminated, BJ Services enters into a definitive agreement with respect to, or consummates, any alternative proposal with the person that had publicly proposed or disclosed an alternative proposal at the time of the BJ Services special meeting; |
• | prior to the approval by BJ Services stockholders of the merger agreement, the merger agreement is terminated by BJ Services in connection with a superior proposal upon the conditions to such terminations described above; or | |
• | the merger agreement is terminated by Baker Hughes because the BJ Services board of directors makes a change in its recommendation as described in “ — Additional Agreements — BJ Services’ Ability to Make a Change in its Recommendation.” |
• | the merger agreement is terminated by BJ Services because the Baker Hughes board of directors makes a change in its recommendation as described in “ — Additional Agreements — Stockholders’ Meetings”; | |
• | (a) a “Baker Hughes alternative proposal,” as defined below, has been publicly proposed or disclosed prior to, and not withdrawn at the time of, the special meeting of the Baker Hughes stockholders and thereafter, (b) the merger agreement is terminated by BJ Services or Baker Hughes because the Baker Hughes stockholders do not approve the issuance of Baker Hughes common stock in connection with the merger, and (c) within twelve months after the date the merger agreement is terminated, Baker Hughes enters into a definitive agreement providing for, or consummates, a Baker Hughes alternative proposal with the person that had publicly proposed or disclosed a Baker Hughes alternative proposal at the time of the Baker Hughes special meeting; or | |
• | prior to the approval by the Baker Hughes stockholder of the issuance of Baker Hughes common stock in connection with the merger, the merger agreement is terminated by Baker Hughes in connection with a Baker Hughes superior proposal upon the conditions to such termination described above. |
• | an alternative proposal has been publicly proposed or disclosed prior to, and not withdrawn at the time of, the special meeting of the BJ Services stockholders; | |
• | thereafter the merger agreement is terminated by BJ Services or Baker Hughes because the BJ Services stockholders do not approve and adopt the merger agreement; and | |
• | no termination fee is yet payable in respect of such termination. |
• | a Baker Hughes alternative proposal has been publicly proposed or disclosed prior to, and not withdrawn at the time of, the special meeting of the Baker Hughes stockholders; | |
• | thereafter the merger agreement is terminated by BJ Services or Baker Hughes because the Baker Hughes stockholders do not approve the issuance of Baker Hughes common stock in connection with the merger; and | |
• | no termination fee is yet payable in respect of such termination. |
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• | the term “alternative proposal” has the meaning set forth under “ — Additional Agreements — Meaning of “alternative proposal,” except that all references to “15%” therein will be deemed to be references to “100%;” | |
• | the term “Baker Hughes alternative proposal” means any proposal or offer from any person or group of persons other than BJ Services or one of its subsidiaries or any group of which BJ Services or any of its subsidiaries is a member (a) for a merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or any similar transaction or series of transactions involving Baker Hughes (or any of whose business constitutes 100% of the net revenues, net income or assets of Baker Hughes and its subsidiaries, taken as a whole), (b) for the issuance by Baker Hughes of 100% of its equity securities or (c) to acquire in any manner, directly or indirectly, 100% or more of the equity securities or consolidated total assets of Baker Hughes and its subsidiaries; and | |
• | the term “Baker Hughes superior proposal” means any Baker Hughes alternative proposal (a) which provides that 100% of Baker Hughes’ outstanding equity securities will be converted into, exchanged for or otherwise cancelled in exchange for the right to receive consideration that does not constitute 50% or more of the outstanding equity securities of the acquiring or surviving entity or its ultimate parent or (b) providing for the sale of all or substantially all of Baker Hughes’ assets, in either case on terms which the Baker Hughes board of directors determines in its good faith judgment, after consultation with Baker Hughes’ outside counsel and financial advisors, would, if consummated, result in a transaction more favorable from a financial point of view to the holders of Baker Hughes common stock than the merger (or any bona fide written offer or proposal made by BJ Services in response to such Baker Hughes alternative proposal or otherwise), taking into account all the terms and conditions of such Baker Hughes alternative proposal and the merger agreement (including any conditions to and expected timing of consummation thereof, and all legal, financial and regulatory aspects of such Baker Hughes alternative proposal and the merger agreement). |
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AND BJ SERVICES STOCKHOLDERS
Baker Hughes | BJ Services | |
Capital Stock: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
Baker Hughes is authorized to issue: | BJ Services is authorized to issue: | |
• 750,000,000 shares of common stock, of which 311,689,017 were issued and outstanding as of January 15, 2010. Immediately following the completion of the merger, Baker Hughes expects to have approximately 430 million shares of common stock outstanding (based on the number of outstanding shares of BJ Services common stock and equity awards as of January 15, 2010, and based on the assumption that no options to purchase Baker Hughes or BJ Services common stock are exercised prior to completion of the merger). | • 910,000,000 shares of common stock, of which 293,657,388 were issued and outstanding as of January 15, 2010. • 5,000,000 shares of preferred stock, of which none are issued and outstanding. | |
• 15,000,000 shares of preferred stock, of which none are issued and outstanding. | ||
Rights Plans: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• Baker Hughes is not a party to a rights plan. | • BJ Services is a party to a rights plan. |
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Baker Hughes | BJ Services | |
Number and Term of Directors: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• The board of directors must consist of eleven directors who are elected annually. • The number of directors shall be fixed from time to time by the bylaws or an amendment thereof. | • The number of directors shall consist of a minimum of four and a maximum of ten directors. The board of directors is divided into three classes, each director serving for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected. | |
• The number of directors shall be fixed from time to time within the minimum and maximum number established by the then elected board of directors. | ||
• Currently, there are eleven directors on the board of directors. All of these directors are elected by the stockholders. Post-merger, Baker Hughes will have thirteen directors on the board of directors, two of whom will be former directors of BJ Services. | • Currently, there are seven directors on the board of directors. All of these directors are elected by the common stockholders. | |
Removal of Directors: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• Any director may be removed with or without cause by a majority stockholder vote. | • Any director may be removed for cause by a majority stockholder vote; stockholders may not remove any director without cause. | |
Filling Director Vacancies | ||
Pre-Merger and Post-Merger | Pre-Merger | |
• Under the Baker Hughes bylaws, in the case of any vacancy in the board of directors, however created, the vacancy or vacancies shall be filled by a majority vote of the directors then in office. However, if by the affirmative vote of a majority of the directors then in office the board of directors determines that a newly created directorship or vacancy should be filled by the stockholders, the stockholders shall elect a nominee to fill such newly created directorship or vacancy. | • Under the BJ Services bylaws, in the case of any vacancy in the board of directors, however created, the vacancy or vacancies shall be filled by majority vote of the directors then in office. A newly created directorship shall be filled by a majority vote of the directors then in office unless the position is to be filled by stockholders. | |
Stockholder Consents: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• Baker Hughes stockholders may not act by written consent. | • BJ Services stockholders may not act by written consent. | |
Votes Per Share: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• Each common stockholder is entitled to one vote per share. | • Each common stockholder is entitled to one vote per share. |
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Baker Hughes | BJ Services | |
Stockholder Proposals and Director Nominations | ||
Pre-Merger and Post-Merger | Pre-Merger | |
• Stockholders may propose business to be brought and may nominate candidates for election to the board of directors in connection with an annual meeting. | • Stockholders may propose business to be brought and may nominate candidates for election to the board of directors in connection with an annual meeting. | |
• For business to be properly brought and nominations properly made before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of Baker Hughes. To be timely, notice must be received by the Secretary, in general, not less than 120 days nor more than 150 days before the one year anniversary of the date on which Baker Hughes’ proxy statement was released to stockholders in connection with the previous year’s annual meeting of stockholders. | • For business to be properly brought and nominations properly made before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of BJ Services. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of BJ Services, in general, not less than 90 days prior to the date of the anniversary of the annual meeting of stockholders held in the prior year. | |
• A stockholder’s notice to the Secretary of business to be brought must set forth, in general, (i) a brief description of the business proposed and reasons for conducting such business at the annual meeting, (ii) name and address of each proposing party, (iii) class and number of shares of Baker Hughes which are owned beneficially and of record, directly and indirectly, by each proposing party, and all other related ownership interests (including derivatives, hedged positions, synthetic and temporary ownership techniques, swaps, securities loans, timed purchases and other economic and voting interests) and (iv) a description of the stockholder’s interests in the proposed business. | • A stockholder’s notice to the Secretary of business to be brought must set forth, in general, (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of BJ Services which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business. | |
• A stockholder’s nomination of person(s) for election to the board of directors must set forth, in general, (i) information about each proposed nominee that is required to be disclosed in solicitations of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected), (ii) each proposed nominee’s independence, any voting commitments and/or other obligations such person will be bound by as a director, and any material relationships between such person and (A) the nominating stockholder, or (B) the beneficial owner, if any, on whose behalf the nomination is made, including compensation and financial transactions, (iii) name and address of nominating parties and (iv) class and number of shares of Baker Hughes which are owned beneficially and of record, directly and indirectly, by each nominating party, and all other related ownership interests (including derivatives, hedged positions, synthetic and temporary ownership techniques, swaps, securities loans, timed purchases and other economic and voting interests) and (iv) a description of interests of each nominating party in such nomination. | • A stockholder’s nomination of person(s) for election to the board of directors must set forth, in general, (i) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act or any successor regulation thereto (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving the notice (A) the name and address, as they appear on BJ Services’ books, of such stockholder, and (B) the class and number of shares of BJ Services which are beneficially owned by such stockholder. At the request of the board of directors, any person nominated by the board of directors for election as a director shall furnish to the Secretary of BJ Services that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. |
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Baker Hughes | BJ Services | |
Adjournment of Stockholder Meetings: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• If a quorum is not represented at any stockholder meeting, a majority of the stockholders represented or the chairman of the meeting has the power pursuant to the Baker Hughes bylaws to adjourn the meeting until a quorum is represented. | • If a quorum is not represented at a stockholder meeting, a majority of stockholders represented has the power pursuant to the BJ Services bylaws to adjourn the meeting until a quorum is represented. | |
Special Meeting of Stockholders: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• May be called by the board of directors or by a committee of the board of directors authorized to call special meetings. | • May be called by the board of directors or by a committee of the board of directors authorized to call special meetings. | |
Vote on Business Combinations: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• Under Delaware law, a business combination generally requires the affirmative vote of the board of directors and (except in limited circumstances) the affirmative vote of a majority of the outstanding stock entitled to vote on the transaction. | • Under Delaware law, a business combination generally requires the affirmative vote of the board of directors and (except in limited circumstances) the affirmative vote of a majority of the outstanding stock entitled to vote on the transaction. | |
• Notwithstanding the foregoing provision, the affirmative vote of the holders of not less than 75% of the outstanding shares of capital stock entitled to vote generally in the election of directors (the Voting Stock), including the affirmative vote of the holders of not less than 662/3% of the outstanding shares of Voting Stock not owned, directly or indirectly, by any related person (which includes any person or entity which is the beneficial owner in the aggregate of 10% or more of outstanding Voting Stock) is required for the approval or authorization of any business combination with any related person, except that,inter alia, (a) the 662/3% voting requirement referred to above is not applicable if the business combination is approved by the affirmative vote of the holders of not less than 90% of the Voting Stock and (b) the 75% voting requirement is not applicable if, inter alia, the board of directors by a vote of not less than 75% of the directors then holding office (i) have expressly approved in advance the acquisition of outstanding shares of Voting Stock that caused the related person to become a related person, (ii) have approved the business combination prior to the related person involved in the business combination having become a related person or (iii) the business combination is solely between BJ Services and a wholly owned subsidiary of BJ Services. |
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Baker Hughes | BJ Services | |
Exculpation and Indemnification of Officers and Directors | ||
Pre-Merger and Post-Merger | Pre-Merger | |
• The Baker Hughes certificate of incorporation contains a provision that eliminates the personal liability of a director to Baker Hughes and its stockholders for monetary damages for breach of his fiduciary duty as a director to the extent currently allowed under the DGCL. Under the Baker Hughes certificate of incorporation, liability for monetary damages remains for (i) any breach of the duty of loyalty to Baker Hughes or its stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) payment of an improper dividend or improper repurchase of Baker Hughes stock under Section 174 of the DGCL, or (iv) any transaction from which the director derived an improper personal benefit. The Baker Hughes certificate of incorporation further provides that in the event the DGCL is amended to allow the further elimination or limitation of the liability of directors, then the liability of Baker Hughes’ directors shall be limited or eliminated to the fullest extent permitted by the amended DGCL. | • The BJ Services certificate of incorporation provides that no director of BJ Services shall be held personally liable to BJ Services or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to BJ Services or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. The BJ Services certificate of incorporation also provides that if the DGCL is amended to authorize further limitation or elimination of the personal liability of directors, then the liability of BJ Services’ directors shall be limited or eliminated to the full extent permitted by the DGCL. | |
• Under the Baker Hughes bylaws and indemnification agreements with Baker Hughes’ officers and directors, each person who is or was a director, officer or employee of Baker Hughes or a subsidiary of Baker Hughes, or who, while serving as a director, officer or employee, serves or served any other enterprise or organization at the request of Baker Hughes or a subsidiary of Baker Hughes, shall be indemnified by Baker Hughes to the full extent permitted by the DGCL. Under such law, to the extent that such person is successful on the merits in defense of a suit or proceeding brought against him by reason of the fact that he is or was a director or officer of Baker Hughes, or serves or served any other enterprise or organization at the request of Baker Hughes, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred in connection with such action. Under such law, if unsuccessful in defense of a third-party civil suit or a criminal suit, or if such suit is settled, such a person shall be indemnified against both (i) expenses, including attorneys’ fees, and (ii) judgments, fines and amounts paid in settlement if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of Baker Hughes, and, with respect to any criminal action, had no reasonable cause to believe his conduct was unlawful. If unsuccessful in defense of a suit brought by or in the | • The BJ Services bylaws provide that BJ Services shall indemnify every person who is or was a party or is or was threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of BJ Services or any of its direct or indirect wholly-owned subsidiaries or, while a director, officer, employee or agent of BJ Services or any of its direct or indirect wholly owned subsidiaries, is or was serving at the request of BJ Services or any of its direct or indirect wholly owned subsidiaries, as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, to the full extent permitted by applicable laws, provided that BJ Services shall not be obligated to indemnify any such person against any such action, suit or proceeding which is brought by such person against BJ Services or any of its direct or indirect wholly owned subsidiaries or the directors of BJ Services or any of its direct or indirect wholly owned subsidiaries, other than an action brought by such person to enforce his rights to indemnification hereunder, unless a majority of the board of directors shall have |
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right of Baker Hughes, or if such a suit is settled, such a person shall be indemnified under such law only against expenses (including attorneys’ fees) actually and reasonably incurred in the defense or settlement of such suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of Baker Hughes, except that if such person is adjudged to be liable in such a suit to Baker Hughes, he cannot be made whole for expenses unless the court determines that he is fairly and reasonably entitled to indemnity for such expenses. | previously approved the bringing of such action, suit or proceeding. BJ Services shall indemnify every person who is or was a party or is or was threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was licensed to practice law and an employee (including an employee who is or was an officer) of BJ Services or any of its direct or indirect wholly owned subsidiaries and, while acting in the course of such employment committed or is alleged to have committed any negligent acts, errors or omissions in rendering professional legal services at the request of BJ Services or pursuant to his employment (including, without limitation, rendering written or oral legal opinions to third parties) against expenses (including counsel fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, to the full extent permitted by applicable law; provided that BJ Services shall not be obligated to indemnify any such person against any action, suit or proceeding arising out of any adjudicated criminal, dishonest or fraudulent acts, errors or omissions of such person or any adjudicated willful, intentional or malicious acts, errors or omissions of such person. Expenses incurred by an officer or director of BJ Services or any of its direct or indirect wholly owned subsidiaries in defending a civil or criminal action, suit or proceeding shall be paid by BJ Services in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by BJ Services as authorized in the BJ Services bylaws. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. | |
• As permitted by the DGCL, Baker Hughes currently has in effect a directors’ and officers’ liability insurance policy. In addition, Baker Hughes has entered into indemnification agreements with its directors and officers which provide specific contractual assurance that indemnification and advancement of expenses will be available to them regardless of any amendments to or revocation of the indemnification provisions of the Baker Hughes bylaws. | • As permitted by the DGCL, BJ Services maintains officers’ and directors’ liability insurance that insures against claims and liabilities (with stated exceptions) that BJ Services’ officers and directors may incur in such capacities. In addition, BJ Services has entered into indemnification agreements with each of the directors and executive officers pursuant to which each director and executive officer is entitled to be indemnified to the fullest extent allowable under Delaware law. |
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Certificate of Incorporation Amendments: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• The Baker Hughes certificate of incorporation may be amended as provided by statute. | • Amendments to the provisions dealing with (i) the alteration of the bylaws by stockholders, (ii) the prohibition against stockholder action without meetings, (iii) liability of directors, (iv) classification and number of directors, (v) the 75% stockholder vote required for business combinations described above and (vi) adding provisions imposing cumulative voting in the election of directors, require the approval of at least 75% of the total voting power of shares entitled to vote in the election of directors. • Amendments to the provisions dealing with (i) business combinations described above and (ii) the vote required for certain charter amendments also require the approval of 662/3% of such total voting power excluding related persons (as defined in the certificate of incorporation). • All other provisions may be amended as provided by statute. | |
Bylaws Amendments: | ||
Pre-Merger and Post-Merger: | Pre-Merger: | |
• Certain provisions of the bylaws may be amended by the affirmative vote of a majority of the whole board of directors and other provisions may be amended by the affirmative vote of 75% of the whole board of directors. • The bylaws may also be amended by the vote of the holders of at least a majority of the total voting power of all shares of stock entitled to vote in the election of directors. | • Certain provisions of the bylaws may be amended by the affirmative vote of a majority of the whole board of directors and other provisions may be amended by the affirmative vote of 75% of the whole board of directors. • The bylaws may also be amended by the holders of at least 75% of the total voting power of all of the shares outstanding and entitled to vote in the election of directors . |
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1. | to consider and vote on the proposal to approve the issuance of shares of Baker Hughes common stock pursuant to the merger agreement; | |
2. | to consider and vote upon the proposal to approve the amendment to the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan; | |
3. | to consider and vote upon the proposal to approve the amendment to the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan; | |
4. | to consider and vote on any proposal to authorize the Baker Hughes board of directors, in its discretion, to adjourn the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes at the time of the special meeting; and | |
5. | to transact any other business that may properly come before the special meeting or any adjournment or postponement of the special meeting by or at the direction of the board. |
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• | Internet. Baker Hughes stockholders may submit a proxy over the Internet by going to the website listed on their proxy card. Once at the website, they should follow the instructions to submit a proxy. | |
• | Telephone. Baker Hughes stockholders may submit a proxy using the toll-free number listed on their proxy card.Easy-to-follow voice prompts will help Baker Hughes stockholders and confirm that their submission instructions have been followed. | |
• | Mail. Baker Hughes stockholders may submit a proxy by signing, dating and returning their proxy card in the preaddressed postage-paid envelope provided. |
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1. | to consider and vote on the proposal to approve and adopt the merger agreement; | |
2. | to consider and vote on any proposal to authorize the BJ Services board of directors, in its discretion, to adjourn the special meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes at the time of the special meeting; and | |
3. | to transact any other business that may properly come before the special meeting or any adjournment or postponement of the special meeting by or at the direction of the board. |
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• | Internet. BJ Services stockholders may submit a proxy over the Internet by going to the website listed on their proxy card. Once at the website, follow the instructions to submit a proxy. | |
• | Telephone. BJ Services stockholders may submit a proxy using the toll-free number listed on their proxy card. Easy-to-follow voice prompts will help them and confirm that their submission instructions have been followed. | |
• | Mail. BJ Services stockholders may submit a proxy by signing, dating and returning their proxy card in the preaddressed postage-paid envelope provided. |
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APPROVAL OF AMENDMENT TO THE BAKER HUGHES INCORPORATED
2002 DIRECTOR & OFFICER LONG-TERM INCENTIVE PLAN
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• | individually, alternatively, or in any combination; | |
• | with respect to Baker Hughes, one or more business units, or any combination of the foregoing; | |
• | on an absolute basis, or relative to a target, to a designated comparison group, to results in other periods, or to other external measures; and | |
• | including or excluding items determined to be extraordinary, unusual in nature, infrequent in occurrence, related to the acquisition or disposal of a business, or related to a change in accounting principle, in each case based on Opinion No. 30 of the Accounting Principles Board (APB Opinion No. 30), or other applicable accounting rules, or consistent with Baker Hughes’ policies and practices for measuring the achievement of performance goals on the date the Baker Hughes compensation committee establishes the goals. |
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APPROVAL OF AMENDMENT TO THE BAKER HUGHES INCORPORATED
2002 EMPLOYEE LONG-TERM INCENTIVE PLAN
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• | individually, alternatively, or in any combination; | |
• | with respect to Baker Hughes, one or more business units, or any combination of the foregoing; | |
• | on an absolute basis, or relative to a target, to a designated comparison group, to results in other periods, or to other external measures; and |
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• | including or excluding items determined to be extraordinary, unusual in nature, infrequent in occurrence, related to the acquisition or disposal of a business, or related to a change in accounting principle, in each case based on Opinion No. 30 of the Accounting Principles Board (APB Opinion No. 30), or other applicable accounting rules, or consistent with Baker Hughes’ policies and practices for measuring the achievement of performance goals on the date the Baker Hughes compensation committee establishes the goals. |
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Baker Hughes SEC Filings (File No. 001-09397) | Period and/or Date Filed | ||
Annual Report onForm 10-K | Fiscal year ended December 31, 2008 | ||
Quarterly Report onForm 10-Q | Quarters ended March 31, 2009, June 30, 2009 and September 30, 2009 | ||
Current Reports onForm 8-K | Filed on March 24, 2009, March 31, 2009, June 26, 2009, August 31, 2009, September 8, 2009 and September 11, 2009 | ||
Definitive Proxy Statement on Schedule 14A | Filed on March 3, 2009 | ||
Preliminary Proxy Statement on Schedule 14A | Filed on January 22, 2010 | ||
Description of Baker Hughes capital stock contained in Baker Hughes’ Registration Statement onForm S-3 | Filed on May 8, 2009 | ||
BJ Services SEC Filings (FileNo. 001-32164) | Period and/or Date Filed | ||
Annual Report onForm 10-K, as amended byForm 10-K/A | Fiscal year ended September 30, 2009 | ||
Definitive Proxy Statement on Schedule 14A | Filed on December 19, 2008 | ||
Description of BJ Services capital stock contained in BJ Services’ Registration Statement on Form-8-A12B and any amendment or report filed for the purpose of updating such description | Filed on September 2, 2009 | ||
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2009
(In millions)
Baker Hughes | BJ Services | Pro Forma | Pro Forma | |||||||||||||
Historical | Historical | Adjustments | Combined | |||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 1,487 | $ | 283 | $ | (294 | ) a | $ | 1,476 | |||||||
Accounts receivable, net | 2,220 | 786 | — | 3,006 | ||||||||||||
Inventories, net | 1,967 | 443 | — | 2,410 | ||||||||||||
Other current assets | 418 | 206 | — | 624 | ||||||||||||
Total current assets | 6,092 | 1,718 | (294 | ) | 7,516 | |||||||||||
Property, plant & equipment, net | 3,059 | 2,374 | — | 5,433 | ||||||||||||
Goodwill | 1,410 | 978 | 2,919 | b | 5,307 | |||||||||||
Other noncurrent assets | 622 | 77 | — | 699 | ||||||||||||
Total assets | $ | 11,183 | $ | 5,147 | $ | 2,625 | $ | 18,955 | ||||||||
Current Liabilities: | ||||||||||||||||
Accounts payable | $ | 661 | $ | 341 | $ | — | $ | 1,002 | ||||||||
Short-term borrowings | 23 | 7 | 500 | c | 530 | |||||||||||
Other current liabilities | 769 | 371 | 292 | d | 1,432 | |||||||||||
Total current liabilities | 1,453 | 719 | 792 | 2,964 | ||||||||||||
Long-term debt | 1,783 | 499 | — | 2,282 | ||||||||||||
Other long-term liabilities | 762 | 409 | — | 1,171 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||
Common stock | 310 | 35 | 83 | e | 428 | |||||||||||
Capital in excess of par | 811 | 1,130 | 4,397 | e | 6,338 | |||||||||||
Retained earnings | 6,474 | 3,744 | (4,036 | ) e | 6,182 | |||||||||||
Accumulated other comprehensive income (loss) | (410 | ) | 24 | (24 | ) e | (410 | ) | |||||||||
Treasury stock | — | (1,413 | ) | 1,413 | e | — | ||||||||||
Total stockholders’ equity | 7,185 | 3,520 | 1,833 | 12,538 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 11,183 | $ | 5,147 | $ | 2,625 | $ | 18,955 | ||||||||
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(In millions)
Baker Hughes | BJ Services | Pro Forma | Pro Forma | |||||||||||||||||
Historical | Historical | Reclassifications | Adjustments | Combined | ||||||||||||||||
Revenues | $ | 7,236 | $ | 2,705 | $ | — | $ | — | $ | 9,941 | ||||||||||
Costs and Expenses: | ||||||||||||||||||||
Cost of revenues | 5,518 | 2,440 | 14 | f | — | 7,972 | ||||||||||||||
Research and engineering | 299 | 49 | — | — | 348 | |||||||||||||||
Marketing, general and administration | 835 | 194 | 6 | f | — | 1,035 | ||||||||||||||
Loss on disposal of assets | — | 14 | (14 | ) f | — | — | ||||||||||||||
Acquisition-related costs | 2 | — | 5 | f | — | 7 | ||||||||||||||
Total costs and expenses | 6,654 | 2,697 | 11 | — | 9,355 | |||||||||||||||
Operating income | 582 | 8 | (11 | ) | — | 579 | ||||||||||||||
Interest expense | (98 | ) | (21 | ) | — | (1 | ) g | (120 | ) | |||||||||||
Interest and dividend income | 5 | 1 | — | (1 | ) h | 5 | ||||||||||||||
Other income (expense), net | — | (11 | ) | 11 | f | — | 0 | |||||||||||||
Income (loss) from continuing operations before income taxes | 489 | (23 | ) | — | (2 | ) | 464 | |||||||||||||
Income taxes | (152 | ) | 39 | — | 1 | i | (112 | ) | ||||||||||||
Income (loss) from continuing operations | $ | 337 | $ | 16 | $ | — | $ | (1 | ) | $ | 352 | |||||||||
Income (loss) from continuing operations per share: | ||||||||||||||||||||
Basic | $ | 1.09 | $ | 0.05 | $ | 0.82 | ||||||||||||||
Diluted | $ | 1.09 | $ | 0.05 | $ | 0.82 | ||||||||||||||
Weighted average shares: | ||||||||||||||||||||
Basic | 310 | 118 | j | 428 | ||||||||||||||||
Diluted | 310 | 119 | j | 429 |
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
(In millions)
Baker Hughes | BJ Services | Pro Forma | Pro Forma | |||||||||||||||||
Historical | Historical | Reclassifications | Adjustments | Combined | ||||||||||||||||
Revenues | $ | 11,864 | $ | 5,359 | $ | — | $ | — | $ | 17,223 | ||||||||||
Costs and Expenses: | ||||||||||||||||||||
Cost of revenues | 7,954 | 4,091 | 3 | f | — | 12,048 | ||||||||||||||
Research and engineering | 426 | 72 | — | — | 498 | |||||||||||||||
Marketing, general and administration | 1,046 | 280 | 9 | f | — | 1,335 | ||||||||||||||
Loss on long lived assets, net | — | 3 | (3 | ) f | — | — | ||||||||||||||
Litigation settlement | 62 | — | — | — | 62 | |||||||||||||||
Total costs and expenses | 9,488 | 4,446 | 9 | — | 13,943 | |||||||||||||||
Operating income | 2,376 | 913 | (9 | ) | — | 3,280 | ||||||||||||||
Interest expense | (89 | ) | (28 | ) | — | (1 | ) g | (118 | ) | |||||||||||
Interest and dividend income | 27 | 2 | — | (1 | ) h | 28 | ||||||||||||||
Equity in income of affiliates | 2 | — | — | — | 2 | |||||||||||||||
Gain on sale of product line | 28 | — | — | — | 28 | |||||||||||||||
Impairment loss on investments | (25 | ) | — | — | — | (25 | ) | |||||||||||||
Other income (expense), net | — | (9 | ) | 9 | f | — | — | |||||||||||||
Income (loss) from continuing operations before income taxes | 2,319 | 878 | — | (2 | ) | 3,195 | ||||||||||||||
Income taxes | (684 | ) | (258 | ) | — | 1 | i | (941 | ) | |||||||||||
Income (loss) from continuing operations | $ | 1,635 | $ | 620 | $ | — | $ | (1 | ) | $ | 2,254 | |||||||||
Income (loss) from continuing operations per share: | ||||||||||||||||||||
Basic | $ | 5.32 | $ | 2.11 | $ | 5.30 | ||||||||||||||
Diluted | $ | 5.30 | $ | 2.10 | $ | 5.27 | ||||||||||||||
Weighted average shares: | ||||||||||||||||||||
Basic | 307 | 118 | j | 425 | ||||||||||||||||
Diluted | 309 | 119 | j | 428 |
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FINANCIAL STATEMENTS
Note 1. | Estimated Merger Consideration and Allocation |
Estimated cash consideration payable upon closing: | ||||
295.3 million outstanding BJ Services common shares at $2.69 per share | $ | 794 | ||
Estimated share consideration payable upon closing: | ||||
295.3 million outstanding BJ Services common shares converts to 118.2 million of Baker Hughes common shares using the ratio of 0.40035 and valued at $47.28 per share | 5,590 | |||
Estimated fair value of 11.0 million BJ Services stock options assumed by Baker Hughes | 55 | |||
Merger consideration | $ | 6,439 | ||
10% increase | 10% decrease | |||||||
in Baker | in Baker | |||||||
Hughes share | Hughes share | |||||||
price | price | |||||||
Cash consideration | $ | 794 | $ | 794 | ||||
Share consideration | 6,149 | 5,031 | ||||||
Stock option consideration | 55 | 55 | ||||||
Merger consideration | $ | 6,998 | $ | 5,880 | ||||
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Current assets | $ | 1,718 | ||
Noncurrent assets | 2,451 | |||
Total assets acquired | 4,169 | |||
Liabilities assumed | (1,627 | ) | ||
Net assets acquired | 2,542 | |||
Less: Estimated merger consideration | (6,439 | ) | ||
Estimated goodwill | $ | 3,897 | ||
Note 2. | Reclassifications and Pro Forma Adjustments |
a. | Represents a portion of the estimated cash consideration expected to be funded by cash on hand, that is payable by Baker Hughes to the stockholders of BJ Services upon the consummation of the merger. | |
b. | To record the preliminary valuation of goodwill and to eliminate the historical goodwill of BJ Services (in millions): |
Estimated goodwill from merger | $ | 3,897 | ||
Elimination of BJ Services historical goodwill | (978 | ) | ||
Total | $ | 2,919 | ||
c. | Represents a portion of the estimated cash consideration expected to be funded with $500 million in financing, that is payable by Baker Hughes to the stockholders of BJ Services upon the consummation of the merger. |
d. | Reflects estimated payments to be made to certain BJ Services employees as a result of pre-existing change of control contractual provisions that will become payable at the time the transaction is consummated and estimated transaction costs such as investment banking, legal, accounting, and other professional services, all of which are directly attributable to the transaction. These are non-recurring charges and have been excluded from the pro forma statement of operations. |
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e. | To reflect the estimated stock consideration to be issued to BJ Services upon the consummation of the merger and the reversal of BJ Services historical equity balances. |
Common stock issued as part of the merger consideration | $ | 118 | ||
Elimination of BJ Services historical common stock | (35 | ) | ||
Total adjustment to common stock | $ | 83 | ||
Common stock consideration recorded as capital in excess of par | $ | 5,472 | ||
Option consideration recorded as capital in excess of par | 55 | |||
Elimination of BJ Services historical capital in excess of par | (1,130 | ) | ||
Total adjustment to capital in excess of par | $ | 4,397 | ||
Retained earnings impact from pro forma adjustments | $ | (292 | ) | |
Elimination of BJ Services historical beginning retained earnings | (3,744 | ) | ||
Total adjustment to retained earnings | $ | (4,036 | ) | |
Elimination of BJ Services historical accumulated other comprehensive income | $ | (24 | ) | |
Elimination of BJ Services historical treasury stock | $ | 1,413 | ||
f. | Represents certain reclassifications to conform to the Baker Hughes presentation. |
g. | Reflects an increase in interest expense of $1 million resulting from the $500 million financing, assuming an interest rate based upon Baker Hughes’ 2009 average interest rate on commercial paper of 0.187%. |
h. | Reflects a reduction in interest income of $1 million resulting from the use of $294 million of cash as merger consideration, assuming an interest rate based upon Baker Hughes’ 2009 average interest rate on cash and short-term investments of 0.243%. |
i. | Reflects the incremental income tax provision associated with pro forma adjustments, calculated using statutory rates. |
j. | Reflects the issuance of 118.2 million shares of Baker Hughes common stock to BJ Services stockholders and the dilutive impact of BJ Services options outstanding. |
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Page | ||||||
ARTICLE I | THE MERGER | A-1 | ||||
Section 1.1 | The Merger | A-1 | ||||
Section 1.2 | Closing; Effective Time | A-1 | ||||
Section 1.3 | Effect of the Merger | A-2 | ||||
ARTICLE II | THE SURVIVING ENTITY | A-2 | ||||
Section 2.1 | Certificate of Formation; Limited Liability Company Agreement | A-2 | ||||
Section 2.2 | Officers of the Surviving Entity | A-2 | ||||
Section 2.3 | Directors and Officers of Parent | A-2 | ||||
ARTICLE III | CONVERSION OF SHARES | A-2 | ||||
Section 3.1 | Effect on Capital Stock | A-2 | ||||
Section 3.2 | Appraisal Rights | A-4 | ||||
Section 3.3 | Surrender and Payment | A-4 | ||||
Section 3.4 | Treatment of Options and other Equity Awards | A-6 | ||||
ARTICLE IV | REPRESENTATIONS AND WARRANTIES OF THE COMPANY | A-8 | ||||
Section 4.1 | Organization; Good Standing and Qualification | A-8 | ||||
Section 4.2 | Capitalization; Indebtedness | A-9 | ||||
Section 4.3 | Authorization; No Conflict | A-10 | ||||
Section 4.4 | Subsidiaries | A-11 | ||||
Section 4.5 | SEC Reports; Financial Statements and Internal Controls | A-11 | ||||
Section 4.6 | Absence of Material Adverse Changes, etc. | A-13 | ||||
Section 4.7 | Litigation | A-13 | ||||
Section 4.8 | Information Supplied | A-13 | ||||
Section 4.9 | No Undisclosed Liabilities | A-13 | ||||
Section 4.10 | Broker’s Fees | A-13 | ||||
Section 4.11 | Employee Plans | A-14 | ||||
Section 4.12 | Board Recommendation; Company Action; Requisite Vote of the Company’s Stockholders | A-15 | ||||
Section 4.13 | Taxes | A-16 | ||||
Section 4.14 | Environmental Matters | A-17 | ||||
Section 4.15 | Compliance with Laws | A-18 | ||||
Section 4.16 | Employment Matters | A-18 | ||||
Section 4.17 | Regulatory Matters | A-18 | ||||
Section 4.18 | Title to Properties | A-18 | ||||
Section 4.19 | Intellectual Property | A-19 | ||||
Section 4.20 | Insurance | A-19 | ||||
Section 4.21 | Material Contracts | A-19 | ||||
Section 4.22 | Customers and Suppliers | A-20 | ||||
Section 4.23 | Certain Business Practices | A-20 | ||||
Section 4.24 | Affiliate Transactions | A-21 | ||||
Section 4.25 | Rights Agreement | A-21 | ||||
Section 4.26 | Takeover Laws | A-21 |
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Page | ||||||
ARTICLE V | REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | A-22 | ||||
Section 5.1 | Organization; Good Standing and Qualification | A-22 | ||||
Section 5.2 | Capitalization | A-22 | ||||
Section 5.3 | Authorization; No Conflict | A-23 | ||||
Section 5.4 | SEC Reports; Financial Statements and Internal Controls | A-24 | ||||
Section 5.5 | Absence of Material Adverse Changes, etc. | A-25 | ||||
Section 5.6 | Litigation | A-25 | ||||
Section 5.7 | Information Supplied | A-25 | ||||
Section 5.8 | No Undisclosed Liabilities | A-25 | ||||
Section 5.9 | Broker’s Fees | A-26 | ||||
Section 5.10 | Employee Plans | A-26 | ||||
Section 5.11 | Board Recommendation; Required Parent Vote | A-26 | ||||
Section 5.12 | Taxes | A-27 | ||||
Section 5.13 | Environmental Matters | A-27 | ||||
Section 5.14 | Compliance with Laws | A-28 | ||||
Section 5.15 | Certain Business Practices | A-28 | ||||
Section 5.16 | Sufficient Funds | A-29 | ||||
Section 5.17 | Investment Company | A-29 | ||||
Section 5.18 | Intellectual Property | A-29 | ||||
Section 5.19 | Insurance | A-29 | ||||
Section 5.20 | Customers and Suppliers | A-29 | ||||
Section 5.21 | Affiliate Transaction | A-29 | ||||
Section 5.22 | Takeover Laws | A-29 | ||||
ARTICLE VI | CONDUCT OF BUSINESS PENDING THE MERGER | A-30 | ||||
Section 6.1 | Conduct of Business by the Company Pending the Merger | A-30 | ||||
Section 6.2 | Conduct of Business by Parent Pending the Merger | A-33 | ||||
ARTICLE VII | ADDITIONAL AGREEMENTS | A-34 | ||||
Section 7.1 | Preparation of Proxy Statement; Stockholders’ Meetings | A-34 | ||||
Section 7.2 | Stock Exchange Listing | A-36 | ||||
Section 7.3 | Employee Benefit Matters | A-36 | ||||
Section 7.4 | Section 16 Matters | A-37 | ||||
Section 7.5 | Certain Tax Matters | A-37 | ||||
Section 7.6 | Efforts | A-38 | ||||
Section 7.7 | Stockholder Litigation | A-39 | ||||
Section 7.8 | Public Statements | A-39 | ||||
Section 7.9 | Notification of Certain Matters | A-39 | ||||
Section 7.10 | Access; Confidentiality | A-39 | ||||
Section 7.11 | No Solicitation | A-40 | ||||
Section 7.12 | Indemnification and Insurance | A-42 | ||||
Section 7.13 | State Takeover Laws | A-43 | ||||
ARTICLE VIII | CONDITIONS | A-43 | ||||
Section 8.1 | Conditions to Each Party’s Obligation To Effect the Merger | A-43 | ||||
Section 8.2 | Conditions to Obligations of Parent and Merger Sub | A-44 | ||||
Section 8.3 | Conditions to Obligation of the Company | A-45 |
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ARTICLE IX | TERMINATION, AMENDMENT AND WAIVER | A-45 | ||||
Section 9.1 | Termination by Mutual Consent | A-45 | ||||
Section 9.2 | Termination by the Company or Parent | A-45 | ||||
Section 9.3 | Termination by the Company | A-46 | ||||
Section 9.4 | Termination by Parent | A-46 | ||||
Section 9.5 | Effect of Termination | A-47 | ||||
Section 9.6 | Amendment | A-49 | ||||
Section 9.7 | Waiver | A-49 | ||||
ARTICLE X | GENERAL PROVISIONS | A-49 | ||||
Section 10.1 | Notices | A-49 | ||||
Section 10.2 | Representations and Warranties | A-50 | ||||
Section 10.3 | Interpretations | A-50 | ||||
Section 10.4 | Governing Law; Jurisdiction; Specific Performance | A-50 | ||||
Section 10.5 | Counterparts; Facsimile Transmission of Signatures | A-51 | ||||
Section 10.6 | Assignment; No Third Party Beneficiaries | A-51 | ||||
Section 10.7 | Expenses | A-51 | ||||
Section 10.8 | Severability | A-51 | ||||
Section 10.9 | Entire Agreement | A-51 | ||||
Annex A BJ Services Company Officer’s Certificate | ||||||
Annex B Baker Hughes Incorporated Officer’s Certificate |
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Term | Section | |
Adjusted Stock Right | 3.4(a) | |
Affiliate | 4.24 | |
Agreement | Recital | |
Alternative Proposal | 7.11(d)(i) | |
Appraisal Shares | 3.2 | |
Board | Recital | |
Book Entry Share | 3.1(b) | |
Business Day | 1.2(a) | |
Cash Portion | 3.1(a) | |
Cash Portion Exchange Ratio | 3.4(a) | |
Certificate of Merger | 1.2(b) | |
Change in Recommendation | 7.11(c) | |
Change in the Parent Board Recommendation | 7.1(d) | |
Cleanup | 4.14(h) | |
Closing | 1.2(a) | |
Closing Date | 1.2(a) | |
Code | Recital | |
Company | Recital | |
Company Balance Sheet | 4.13(a) | |
Company Benefit Plans | 4.11(a) | |
Company Board Recommendation | 7.1(c) | |
Company Bonus Stock | 3.4(e) | |
Company Common Stock | Recital | |
Company Credit Agreement | 4.2(e) | |
Company Directors | 2.3 | |
Company Disclosure Letter | 4 | |
Company ERISA Affiliate | 4.11(a) | |
Company Financial Advisors | 4.10 | |
Company Financial Statements | 4.5(b) | |
Company Indenture | 4.2(e) | |
Company Material Adverse Effect | 4.1(b) | |
Company Option | 3.4(a) | |
Company Performance Units | 3.4(b) | |
Company Phantom Stock | 3.4(c) | |
Company Preferred Stock | 4.2(a) | |
Company Rights | 4.2(d) | |
Company Rights Agreement | 4.2(b) | |
Company SEC Reports | 4.5(a) | |
Company Series A Preferred Stock | 4.2(a) | |
Company Special Meeting | 7.1(c) | |
Company Stock Plans | 3.4(a) | |
Company Subsidiaries | 4.1(a) | |
Confidentiality Agreement | 7.11(b) |
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Term | Section | |
DGCL | Recital | |
DOJ | 6.1(b)(xix) | |
Effective Time | 1.2(b) | |
Environmental Claim | 4.14(c) | |
Environmental Laws | 4.14(a) | |
Environmental Permits | 4.14(b) | |
Equipment Partnership Financing | 4.2(e) | |
ERISA | 4.11(a) | |
ESPP | 3.4(d) | |
Exchange Act | 4.3(c) | |
Exchange Agent | 3.3(a) | |
Exchange Fund | 3.3(a) | |
Expenses | 9.5(a) | |
FCPA | 4.23(b) | |
Foreign Company Benefit Plan | 4.11(g) | |
GAAP | 4.1(b) | |
Governmental Entity | 4.3(c) | |
Hazardous Material | 4.14(h) | |
Hedge | 6.1(b)(xxi) | |
HSR Act | 4.3(c) | |
Indemnified Obligations | 7.12(a) | |
Indemnified Persons | 7.12(a) | |
Intellectual Property | 4.19 | |
Investment Company Act | 4.17 | |
Laws | 4.3(b) | |
Liabilities | 4.9 | |
Lien | 4.3(b) | |
Limited Liability Company Act | Recital | |
Market Price | 3.1(f) | |
Material Contracts | 4.21 | |
Merger | Recital | |
Merger Consideration | 3.1(a) | |
Merger Sub | Recital | |
Money Laundering Laws | 4.23(c) | |
NYSE | 3.1(f) | |
Parent | Recital | |
Parent Alternative Proposal | 9.5(a) | |
Parent Balance Sheet | 5.12(a) | |
Parent Board Recommendation | 7.1(d) | |
Parent Common Stock | 3.1(a) | |
Parent Disclosure Letter | 5 | |
Parent ERISA Affiliate | 5.10(a) | |
Parent Financial Advisor | 5.9 | |
Parent Financial Statements | 5.4(b) |
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Term | Section | |
Parent Material Adverse Effect | 5.1(b) | |
Parent Preferred Stock | 5.2(a) | |
Parent Proposal | 5.11(b) | |
Parent SEC Reports | 5.4(a) | |
Parent Special Meeting | 7.1(d) | |
Parent Subsidiaries | 5.1(a) | |
Parent Superior Proposal | 9.5(a) | |
Permitted Lien | 4.3(b) | |
Person | 4.4(a) | |
Proxy/Prospectus | 4.8 | |
Registration Statement | 4.8 | |
Release | 4.14(h) | |
Representative | 7.11(a) | |
Required Company Vote | 4.12(b) | |
Required Parent Vote | 5.11(b) | |
Sarbanes-Oxley Act | 4.5(d) | |
SEC | 3.4(h) | |
Section 409A | 3.4(a) | |
Securities Act Preferred Stock | 4.2(c) | |
Specified Company SEC Disclosure | 4 | |
Specified Parent SEC Disclosure | 5 | |
Standstill Agreement | 7.11(a) | |
Stock Award Exchange Ratio | 3.4(a) | |
Stock Certificate | 3.1(b) | |
Stock Exchange Ratio | 3.1(a) | |
Subsidiary | 4.4(a) | |
Superior Proposal | 7.11(d)(ii) | |
Surviving Entity | 1.1 | |
Tax | 4.13(f) | |
Tax Return | 4.13(g) | |
Termination Date | 9.2(a) | |
Termination Fee | 9.5(a) | |
US Regulatory Regimes | 7.10(a) | |
USG Authorities | 6.1(b)(xix) |
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2929 Allen Parkway, Suite 2100
Houston, Texas 77019
Attention: Senior Vice President — General Counsel Alan Crain
Fax:(713) 439-8966
1111 Louisiana Street, 44th Floor
A-49
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Attention: Christine B. LaFollette
Mark Zvonkovic
4601 Westway Park Blvd.
Houston, TX 77210
Attention: Vice President — General Counsel Margaret Shannon
Fax:(713) 895-5625
One Beacon Street
Boston, MA 02108
Attention: Louis A. Goodman
Frank E. Bayouth
600 Travis, Suite 4200
Houston, TX 77002
Attention: G. Michael O’Leary
Fax:(713) 220-4285
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By: | /s/ Chad Deaton |
Title: | Chairman, President and Chief Executive |
By: | /s/ J.W. Stewart |
Title: | Chairman, President and Chief Executive |
By: | /s/ Peter A. Ragauss |
Title: | President |
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GREENHILL & CO., LLC
By: | /s/ Christopher D. Mize |
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BAKER HUGHES INCORPORATED
2002 DIRECTOR & OFFICER LONG-TERM INCENTIVE PLAN
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BAKER HUGHES INCORPORATED
2002 EMPLOYEE LONG-TERM INCENTIVE PLAN
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FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(In millions, except per share amounts)
Three Months Ended | ||||||||||||
December 31, | September 30, | |||||||||||
2009 | 2008 | 2009 | ||||||||||
Revenues: | ||||||||||||
Sales | $ | 1,251 | $ | 1,569 | $ | 1,091 | ||||||
Services and rentals | 1,177 | 1,617 | 1,141 | |||||||||
Total revenues | 2,428 | 3,186 | 2,232 | |||||||||
Costs and Expenses: | ||||||||||||
Cost of sales | 968 | 1,129 | 937 | |||||||||
Cost of services and rentals | 911 | 1,031 | 824 | |||||||||
Research and engineering | 98 | 114 | 88 | |||||||||
Marketing, general and administrative | 285 | 248 | 270 | |||||||||
Acquisition-related costs | 16 | — | 2 | |||||||||
Total costs and expenses | 2,278 | 2,522 | 2,121 | |||||||||
Operating income | 150 | 664 | 111 | |||||||||
Equity in income of affiliates | — | 1 | — | |||||||||
Gain (loss) on investments | 4 | (25 | ) | — | ||||||||
Interest expense | (33 | ) | (36 | ) | (29 | ) | ||||||
Interest and dividend income | 1 | 5 | 1 | |||||||||
Income before income taxes | 122 | 609 | 83 | |||||||||
Income taxes | (38 | ) | (177 | ) | (28 | ) | ||||||
Net income | $ | 84 | $ | 432 | $ | 55 | ||||||
Basic earnings per share | $ | 0.27 | $ | 1.41 | $ | 0.18 | ||||||
Diluted earnings per share | $ | 0.27 | $ | 1.41 | $ | 0.18 | ||||||
Weighted average shares outstanding, basic | 310 | 306 | 310 | |||||||||
Weighted average shares outstanding, diluted | 311 | 307 | 311 | |||||||||
Depreciation and amortization expense | $ | 179 | $ | 177 | $ | 177 | ||||||
Capital expenditures | $ | 292 | $ | 463 | $ | 222 |
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FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(In millions, except per share amounts)
Twelve Months Ended | ||||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Revenues: | ||||||||
Sales | $ | 4,809 | $ | 5,734 | ||||
Services and rentals | 4,855 | 6,130 | ||||||
Total revenues | 9,664 | 11,864 | ||||||
Costs and Expenses: | ||||||||
Cost of sales | 3,858 | 4,081 | ||||||
Cost of services and rentals | 3,539 | 3,873 | ||||||
Research and engineering | 397 | 426 | ||||||
Marketing, general and administrative | 1,120 | 1,046 | ||||||
Acquisition-related costs | 18 | — | ||||||
Litigation settlement | — | 62 | ||||||
Total costs and expenses | 8,932 | 9,488 | ||||||
Operating income | 732 | 2,376 | ||||||
Equity in income of affiliates | — | 2 | ||||||
Gain on sale of product line | — | 28 | ||||||
Gain (loss) on investments | 4 | (25 | ) | |||||
Interest expense | (131 | ) | (89 | ) | ||||
Interest and dividend income | 6 | 27 | ||||||
Income before income taxes | 611 | 2,319 | ||||||
Income taxes | (190 | ) | (684 | ) | ||||
Net income | $ | 421 | $ | 1,635 | ||||
Basic earnings per share | $ | 1.36 | $ | 5.32 | ||||
Diluted earnings per share | $ | 1.36 | $ | 5.30 | ||||
Weighted average shares outstanding, basic | 310 | 307 | ||||||
Weighted average shares outstanding, diluted | 311 | 309 | ||||||
Depreciation and amortization expense | $ | 711 | $ | 637 | ||||
Capital expenditures | $ | 1,086 | $ | 1,303 |
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CONSOLIDATED BALANCE SHEETS
UNAUDITED
(In millions)
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 1,595 | $ | 1,955 | ||||
Accounts receivable, net | 2,331 | 2,759 | ||||||
Inventories, net | 1,836 | 2,021 | ||||||
Deferred income taxes | 268 | 231 | ||||||
Other current assets | 195 | 179 | ||||||
Total current assets | 6,225 | 7,145 | ||||||
Property, plant and equipment, net | 3,161 | 2,833 | ||||||
Goodwill | 1,418 | 1,389 | ||||||
Intangible assets, net | 195 | 198 | ||||||
Other assets | 440 | 296 | ||||||
Total assets | $ | 11,439 | $ | 11,861 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 821 | $ | 888 | ||||
Short-term borrowings and current portion of long-term debt | 15 | 558 | ||||||
Accrued employee compensation | 448 | 530 | ||||||
Income taxes payable | 95 | 272 | ||||||
Other accrued liabilities | 234 | 263 | ||||||
Total current liabilities | 1,613 | 2,511 | ||||||
Long-term debt | 1,785 | 1,775 | ||||||
Deferred income taxes and other tax liabilities | 309 | 384 | ||||||
Liabilities for pensions and other postretirement benefits | 379 | 317 | ||||||
Other liabilities | 69 | 67 | ||||||
Stockholders’ Equity: | ||||||||
Common stock | 312 | 309 | ||||||
Capital in excess of par value | 874 | 745 | ||||||
Retained earnings | 6,512 | 6,276 | ||||||
Accumulated other comprehensive loss | (414 | ) | (523 | ) | ||||
Total stockholders’ equity | 7,284 | 6,807 | ||||||
Total liabilities and stockholders’ equity | $ | 11,439 | $ | 11,861 | ||||
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Item 20. | Indemnification of Directors and Officers |
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Item 21. | Exhibits |
2.1 | Agreement and Plan of Merger, dated as of August 30, 2009, by and among Baker Hughes Incorporated, BSA Acquisition LLC, and BJ Services Company (attached as Annex A to the joint proxy statement/prospectus that is part of this Registration Statement) (the schedules and annexes have been omitted pursuant to Item 601(b)(2) of Regulation S-K). | |
3.1 | Restated Certificate of Incorporation of Baker Hughes Incorporated (previously filed as Exhibit 3.1 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended June 30, 2007 (No. 001-09397) and incorporated herein by reference). | |
3.2 | Restated Bylaws effective as of April 23, 2009 of Baker Hughes Incorporated (previously filed as Exhibit 3.2 to the registrant’s 2008 Form 10-K (No. 001-09397) and incorporated herein by reference). | |
5.1* | Form of Opinion of Akin Gump Strauss Hauer & Feld LLP as to the legality of the securities. | |
8.1* | Form of Tax Opinion of Fulbright & Jaworski L.L.P. | |
8.2* | Form of Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP. | |
23.1* | Consent of Akin Gump Strauss Hauer & Feld LLP (included in Exhibit 5.1). | |
23.2* | Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 8.1). | |
23.3* | Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.2). | |
23.4* | Consent of Deloitte & Touche LLP, Houston, Texas. | |
23.5* | Consent of Deloitte & Touche LLP, Houston, Texas. | |
24.1** | Powers of Attorney. | |
99.1** | Forms of Proxy for Holders of Baker Hughes common stock. | |
99.2* | Form of Proxy for Holders of BJ Services common stock. | |
99.3 | Omitted. | |
99.4* | Consent of Goldman, Sachs & Co. | |
99.5* | Consent of Greenhill & Co. | |
99.6** | Consent of Merrill, Lynch, Pierce, Fenner & Smith Incorporated | |
99.7** | Consent of J.W. Stewart pursuant to Rule 438 under the Securities Act | |
99.8** | Consent of James L. Payne pursuant to Rule 438 under the Securities Act |
* | Filed herewith | |
** | Previously filed |
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Item 22. | Undertakings |
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By: | /s/ PETER A. RAGAUSS |
Title: | Senior Vice President and Chief Financial Officer |
Signature | Title | |||
/s/ CHAD C. DEATON (Chad C. Deaton) | Chairman of the Board, President and Chief Executive Officer (principal executive officer) | |||
/s/ PETER A. RAGAUSS (Peter A. Ragauss) | Senior Vice President and Chief Financial Officer (principal financial officer) | |||
/s/ ALAN J. KEIFER (Alan J. Keifer) | Vice President and Controller (principal accounting officer) | |||
* (Larry D. Brady) | Director | |||
* (Clarence P. Cazalot, Jr.) | Director | |||
* (Edward P. Djerejian) | Director | |||
* (Anthony G. Fernandes) | Director | |||
* (Claire W. Gargalli) | Director | |||
* (Pierre H. Jungels) | Director | |||
* (James A. Lash) | Director | |||
* (J. Larry Nichols) | Director |
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Signature | Title | |||
* (H. John Riley, Jr.) | Director | |||
* (Charles L. Watson) | Director | |||
* By: /s/ PETER A. RAGAUSS Name: Peter A. Ragauss | Attorney-in-fact |
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Exhibit | ||||
Number | Description | |||
2 | .1 | Agreement and Plan of Merger, dated as of August 30, 2009, by and among Baker Hughes Incorporated, BSA Acquisition LLC, and BJ Services Company (attached as Annex A to the joint proxy statement/prospectus that is part of this Registration Statement) (the schedules and annexes have been omitted pursuant to Item 601(b)(2) ofRegulation S-K). | ||
3 | .1 | Restated Certificate of Incorporation of Baker Hughes Incorporated (previously filed as Exhibit 3.1 to Quarterly Report of Baker Hughes Incorporated onForm 10-Q for the quarter ended June 30, 2007 (No. 001-09397) and incorporated herein by reference). | ||
3 | .2 | Restated Bylaws effective as of April 23, 2009 of Baker Hughes Incorporated (previously filed as Exhibit 3.2 to the registrant’s 2008Form 10-K (No. 001-09397) and incorporated herein by reference). | ||
5 | .1* | Form of Opinion of Akin Gump Strauss Hauer & Feld LLP as to the legality of the securities. | ||
8 | .1* | Form of Tax Opinion of Fulbright & Jaworski L.L.P. | ||
8 | .2* | Form of Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP. | ||
23 | .1* | Consent of Akin Gump Strauss Hauer & Feld LLP (included in Exhibit 5.1). | ||
23 | .2* | Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 8.1). | ||
23 | .3* | Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.2). | ||
23 | .4* | Consent of Deloitte & Touche LLP, Houston, Texas. | ||
23 | .5* | Consent of Deloitte & Touche LLP, Houston, Texas. | ||
24 | .1** | Powers of Attorney. | ||
99 | .1** | Forms of Proxy for Holders of Baker Hughes common stock. | ||
99 | .2* | Form of Proxy for Holders of BJ Services common stock. | ||
99 | .3 | Omitted. | ||
99 | .4* | Consent of Goldman, Sachs & Co. | ||
99 | .5* | Consent of Greenhill & Co. | ||
99 | .6** | Consent of Merrill, Lynch, Pierce, Fenner & Smith Incorporated | ||
99 | .7** | Consent of J.W. Stewart pursuant to Rule 438 under the Securities Act | ||
99 | .8** | Consent of James L. Payne pursuant to Rule 438 under the Securities Act |
* | Filed herewith | |
** | Previously filed |