Hughes Tool Co said its board hasappointed a committee to search for a chief operating officer
in the event that it does not complete its merger with Baker
International Corp &lt;BKO>.
    Last night, Hughes directors said it would terminate its
agreement to merge with Baker because Baker would only proceed
if Hughes signed a consent decree with the U.S. Justice
Department that the Hughes board had determined to be
unreasonable.
    The post of chief operating officer is now vacant at
Hughes.  Chairman W.A. Kistler Jr. is chief executive officer.
    Hughes said it proposed to Baker that the companies ask the
Justice Department to allow them to proceed with the merger on
condition that they find a buyer approved by the  Department
for the domestic oilfield tricine rock bit assets of Baker's
Reed subsidiary, its Singapore plant and Baker Lift's domestic
electrical submersible pump business by April 22, the last date
the merger of Baker and Hughes could occur under their
agreement.
    Hughes said its proposal would have been conditioned on it
not being required to license the purchaser with any Hughes
technology and on the imposition of no more adverse conditions.
    Hughes said "For reasons Hughes does not fully understand,
Baker declined to proceed in this fashion and insisted that it
would proceed only if Hughes signed the consent decree."
    The company said its board found the consent decree to be
unreasonable because some "unusual terms" in the decree posed a
substantial risk that control of the divestiture of Reed would
be passed to a trustee owing no duties to the shareholders of
the combined company, which would have been called Baker Hughes
Inc, and would include all of Reed's international assets and
its coring and diamond bit assets.
    Hughes said the board also found unacceptable the consent
decree condition that the merged company fund ongoing losses of
Reed and Reed capital expenditures for as long as it took to
sell Reed.
    The company said the board decision to adopt its own
divestiture plan and terminate the merger agreement if Baker
did not accept was unanimous.
 Reuter
