It is unclear as to what the issue might be but according to user Jenny YL on the Google Product Forums, “Hangout unmerged SMS and hangout for all of my conversations today. When I tried to manually merge the SMS and hangout by holding and selecting different conversations, the merge option doesn’t show up. I tried clearing the cache and data, and I also uninstalled and reinstall the updates for the hangout app, but the problem remains.”
The issue was originally reported on the 19th of June (although this could potentially be dated further back) and according to a more recent acknowledgement by Chris, a Google Community Manager, it seems that the issue has been identified by Google’s engineering team and that they are working on a fix that should be rolled out soon. No specific dates were mentioned but if you are experiencing this issue yourself, then you’ll be glad to know you’re not alone. Either way we’ll be keeping an eye out for the fix so check back with us at a later date for the details.