U.S. Sues to Block Halliburton-Baker Hughes Deal

"I have never seen [a merger] that poses so many antitrust problems in so many markets," a top Justice Department official says.
Matthew HellerApril 6, 2016

The U.S. Department of Justice on Wednesday sued to block Halliburton’s planned $35 billion acquisition of Baker Hughes, saying the oilfield services giants had failed to overcome the deal’s “fundamental antitrust problems” by offering to sell off assets to other companies.

The merger, originally announced in November 2014, has run into antitrust headwinds around the globe including Europe. It would combine the second and third largest suppliers of oilfield services.

Halliburton and Baker Hughes have been trying to clear the antitrust hurdle by proposing a list of asset divestitures, but the DoJ indicated those efforts had fallen far short. According to its antitrust complaint, the deal would eliminate competition in markets for 23 products or services used for on- and off-shore oil exploration and production in the U.S.

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“I have seen a lot of problematic mergers in my time,” Bill Baer, the department’s antitrust chief, said. “But I have never seen one that poses so many antitrust problems in so many markets.”

In eight markets, Baer said, the combined companies would have over 90% of U.S. sales, and in nine others, their market share would be above 70%.

“The U.S. economy, American consumers, and those who engage in the production of energy consumed in the United States cannot be asked to accept the risk to competition posed by this transaction,” the complaint said.

Halliburton and Baker Hughes agreed last year to divest as much as $7.5 billion worth of business if required by regulators and, in January, Halliburton said it had presented an expanded list of possible divestitures to the DoJ.

But Attorney General Loretta Lynch said the companies’ proposed remedy “falls far short of preserving – much less enhancing – the current competitive dynamic.” The merger, she added, is “not fixable and should be enjoined.”

If the deal collapses due to antitrust concerns, Halliburton must pay Baker Hughes a $3.5 billion breakup fee. The companies said they would “vigorously contest” the government’s lawsuit.

“Both companies strongly believe that the proposed divestiture package, which was significantly enhanced, is more than sufficient to address the DOJ’s specific competitive concerns,” they said in a news release.