Halliburton is to buy Baker Hughes for about $35 billion in cash and stock, creating an oilfield services behemoth to take on market leader Schlumberger as customers begin to cut spending due to falling oil prices.

Halliburton expressed confidence that the deal would clear regulatory hurdles, but Baker Hughes shares were trading well below the offer, suggesting that investors were not so sure.

Halliburton has also agreed to sell businesses that account for as much as $7.5 billion of revenue, should regulators demand it. Its executives repeated that they were “absolutely confident” and would pay Baker Hughes $3.5 billion if the deal was not cleared.

"At the end of the day, we wouldn't have done this deal if we didn't believe it was achievable from a regulatory standpoint," Halliburton Chief Executive Dave Lesar said.

The deal, the second biggest in the US energy sector this year, would create a company that would dominate the North American market for hydraulic fracturing.While there are at least seven major services where there is an overlap between the two companies, the deal would fill gaps in two product lines in Halliburton’s portfolio – product chemicals and pumps that boost output from oil and gas wells.

Baker Hughes shares were trading at $65.40 just after the opening on yesterday, well short of Halliburton’s offer of $80.69, which was based on Friday’s close. Halliburton shares were down 8.5 per cent at $50.34. Schlumberger was up 0.3 per cent at $95.60.

Talks between the two companies started over a month ago and came to a head on Friday when Halliburton threatened to replace Baker Hughes’s board after its initial offer was rejected. – (Reuters)