ValueAct Reports 5.1% Stake In Baker Hughes--Update

By George Stahl And Lauren Pollock 

Activist investor ValueAct Capital Management LP reported Friday a 5.1% stake in Baker Hughes, a provider of oil-field services.

The timing of the stake is interesting as Baker Hughes is in an agreement to be bought by rival Halliburton Co. The cash-and-stock deal was valued at nearly $35 billion when announced in November but has fallen in recent months as the sharp decline in oil prices has pressured the valuation of many energy-related companies. Investors are required to disclose their stakes when they hit the 5% threshold.

ValueAct didn't indicate its motives in the filing with the Securities and Exchange Commission that revealed its stake.

In an email, ValueAct's founder and chief executive, Jeffrey Ubben, wrote, "We love the combination." Representatives from Baker Hughes were unavailable for comment.

ValueAct bought the Baker Hughes stake for $1.22 billion and started buying the week after the deal was announced. It averaged a price of about $55.68 a share. Baker Hughes closed Friday at $56.56, which is about 10% below where the Halliburton deal values the stock.

In November, Halliburton agreed to buy Baker Hughes for $34.6 billion in stock and cash. The deal came after weeks of discussions that at one point turned hostile.

The agreement also contains a $3.5 billion breakup fee should the deal collapse over antitrust issues. The two companies have many overlapping businesses, such as computer-controlled horizontal drilling and hydraulic fracturing of oil and gas wells. They also drill in many of the same regions, from U.S. shale fields in Texas and North Dakota to the deep waters off the coast of Brazil.

ValueAct garnered attention in 2013 when it secured a board seat at Microsoft Corp. despite holding less than 1% of the stock, marking the first time the software giant appointed an activist shareholder to its board.

The roughly $15 billion San Francisco hedge fund typically likes to work behind the scenes with management rather than fight publicly like many activists. The Wall Street Journal reported last month that ValueAct planned to raise up to $1.5 billion in new funds, joining a group of activist investors who are gearing up to target a fresh crop of companies.

Activist investors, who buy stakes in companies and push them to make financial or strategic changes, solidified their position as a force in U.S. markets and boardrooms in 2014, forcing deals, unseating boards and pushing for other corporate changes.

David Benoit contributed to this article.

Write to George Stahl at [e-mail] and Lauren Pollock at [e-mail]

Access Investor Kit for Baker Hughes, Inc.

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Access Investor Kit for Halliburton Co.

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