HOUSTON -- The Justice Department has proposed a consent decree that would pave the way for the merger of Baker International and Hughes Tool, spokesmen for both oil-field equipment companies said.
The draft, as previously outlined by Baker executives, calls for the Orange, Calif., company to sell its drill bit and electric pump businesses, although the sales might not be completed until after the merger.
A Justice Department official Tuesday said negotiations still were under way on the proposed decree.
'We haven't settled on a final agreement,' the government spokesman said, adding 'We remain optimistic we can work it out.' But he refused to outline the proposal's details.
Baker sold its pump unit last week, and firm officials say there is wide interest in its Reed Rock Bit division.
Hughes Tool Monday announced it has postponed its special stockholders meeting by a week to give its directors more time to consider the plan. But Baker shareholders are scheduled to vote on the merger at a special meeting Wednesday.
An analyst told the Tuesday Houston Chronicle he believes the delay on Hughes' part means the Houston-based firm has some reservations about the merger.
'Hughes may want to posture that these are independent companies up to the time of the merger and that it wants to make its own decision separate from Baker,' said Robin Shoemaker, an analyst at E.F. Hutton & Co. in New York.
'But I don't see how it can become unraveled,' he added of the pending merger. Shoemaker said both firms need the merger to survive the downturn in oil and gas drilling.
The Justice Department last month said it planned to file suit to block the merger because it lessened competition in the markets for tricone drill bits and electric submersible pumps.
Baker executives indicated shortly afterward that they intended to sell the assets to gain the Justice Department's blessing.
But after Baker Chairman E.H. 'Hubie' Clark told reporters in Houston that a consent decree was near, a Hughes spokesman said the Justice Department's position 'was more restrictive' than had been reported.
A Hughes spokesman cited the firms' joint proxy statement, which says divestiture of the two Baker units means some of the cost efficiencies initially anticipated from the merger will not be realized.
The proxy said the sales will generate cash that will be used to reduce long-term debt and that will eliminate the need to fund previously anticipated operating losses for this year.
'The board has to consider the implications and the economic consequencs under the terms of the decree,' a Hughes spokesman said Monday. 'What is the time table? The board wants to make sure its recommendation is in the best interest of shareholders.'
A Baker spokesman declined comment on the delay of the Hughes shareholders meeting.
The firms will lose cost savings from merging Baker's Reed and Hughes drill bit business. Shoemaker of E.F. Hutton said, but other cost savings are left largely intact.
Baker executives have said the merger with Hughes was attractive because the companies overlap in 11 products. After the divstitures, the firms could consolidate their operations in nine product lines.
