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By Mike Stone
(Reuters) - Oilfield services provider Halliburton Co (N:HAL) is mulling a hostile bid for smaller peer Baker Hughes Inc (N:BHI) after the latter pulled out of talks on Friday, two people familiar with the discussions said.
The companies have so far failed to agree on a price and other key issues such as how to address antitrust concerns, the people said. However, Baker Hughes could still return to the negotiating table, one of the people added.
The latest development, first reported by Bloomberg News after the stock market closed, would start another chapter in a strained takeover courtship to create the second largest drilling, logistics and well services provider.
Halliburton first approached Baker Hughes more than a month ago and considered making an unsolicited bid because Baker Hughes was reluctant to engage, a third person familiar with the matter said last week.
All the sources asked not to be identified because the talks are private.
Halliburton shares edged down 0.3 percent after ending 1.3 percent higher at $55.08 (35.15 pounds). Baker Hughes fell 2.5 percent from its closing price of $59.89, also on the New York Stock Exchange.
Halliburton has considered proposing a slate of directors to Baker Hughes' board, one of the first two sources said. The deadline for such nominations expires on Friday.
Halliburton and Baker Hughes declined to comment.
A merged company would be worth $67 billion and have 140,000 employees. But it would be only half the size of industry leader Schlumberger (N:SLB), which has a market capitalisation of $125 billion.
If a deal were struck, the companies could well have to sell assets to convince regulators they would not hurt competition, said Seth Bloom, an attorney who is a former veteran of the U.S. Department of Justice's antitrust division.
One of the sources said up to $7.5 billion in divestitures was contemplated by the parties.
The last major deal in the energy industry, announced in August and worth some $70 billion, was pipeline giant Kinder Morgan Inc's (N:KMI) move to fold its various units into a single entity.
(Reporting by Mike Stone in New York; Editing by Richard Chang)