Halliburton Buys Gearhart for $277 Million

DALLAS — Halliburton Co. agreed Thursday to buy Gearhart Industries Inc. for about $277 million in cash and stock in a deal that will give Halliburton a bigger foothold in “wire-line” oilfield services.

Wall Street and industry analysts applauded the definitive merger agreement, which still must be approved by shareholders and debtors. But a major holder of Gearhart debt, oil-rig contractor Energy Service Co., indicated that it would not give up its own efforts to take over Gearhart.

“We’re not out of the picture,” said a spokesman for Energy Service, a Houston-based firm headed by investor Richard Rainwater.

The spokesman for Energy Service, which holds about $34 million in Gearhart debt, said the Halliburton-Gearhart deal still depends on the approval of Gearhart’s debtholders.

Halliburton signed a letter of intent in February to acquire Gearhart for about $277 million in cash and stock. However, Energy Service had already made a bid valued at about $260 million and subsequently bought Gearhart debt as a gesture of good faith, according to the spokesman.

In a statement announcing Thursday’s agreement, Halliburton said it has altered the terms of the acquisition in a move which analysts said could have been made to appease Rainnwater.

Halliburton declined to comment on the speculation. “We are reallocating some of the consideration,” said spokesman Guy Marcus. He said, though, that the revised deal improved terms for debtholders at the expense of common stock owners.

Analyst Jim Crandell of Salomon Bros. in New York said the change in terms from February resulted in about $9 million less going to common and convertible preferred stockholders, with the equivalent amount going to senior and subordinated debt and redeemable preferred stock.

“Halliburton probably made the change to sweeten the offer to senior debt holders to gain acceptance from (Energy Service),” said analyst Tom Escott of Dallas-based brokerage Rauscher Pierce Refines Inc.

Halliburton officials and analysts said acquisition of Gearhart would give the Dallas company a bigger, potentially lucrative role in the growing wire-line sector of the generally depressed oilfield-services business.

Wire-line technology uses electronic devices to search below ground for oil. Schlumberger Ltd. is the leader in wire-line technology.

“I think it will be a good fit. It adds a good quality name to Halliburton,” Escott said.

“It’s very positive for Halliburton,” Crandell said.

He added that the acquisition was being made on attractive terms and that it was being made in Halliburton’s core business.