Risk & Compliance

Activist Fund Fined $11M on Antitrust Charges

ValueAct failed to notify regulators that it purchased stock in Baker Hughes and Halliburton after the two companies proposed a merger, says the DOJ.
Matthew HellerJuly 13, 2016

Activist investor ValueAct has agreed to pay a record $11 million to settle charges that it failed to seek antitrust clearance for its investments in Baker Hughes and Halliburton after the energy firms announced their proposed merger.

The Hart-Scott-Rodino Act requires buyers of more than $78.2 million of a company’s stock to notify regulators. According to the U.S. Department of Justice, ValueAct did not qualify for an exception to the rule because it was not a “passive investor” in Baker Hughes and Halliburton.

“ValueAct purchased these shares with the intent to influence the companies’ business decisions — including decisions related to the merger — and therefore could not rely on the limited ‘investment-only’ exemption to the HSR Act’s notification requirements,” the DoJ said Tuesday in a news release.

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The $11 million fine is the largest ever in a case alleging Hart-Scott-Rodino violations. The government had sought as much as much as $19 million.

ValueAct said in a statement that it “fundamentally disagrees with DoJ’s interpretation of the facts in connection with our investments in Halliburton and Baker Hughes.”

“However, due to the sudden and unanticipated 150% increase in the potential penalties associated with alleged Hart-Scott-Rodino violations effective August 1, we felt we had no choice but to resolve this case as quickly as possible,” the fund said.

Baker Hughes and Halliburton announced in November 2014 that they planned to merge in a deal valued at $35 billion. After the announcement, ValueAct purchased $2.5 billion in the companies’ shares, crossing the reporting thresholds for each of them in early December 2014.

The DoJ alleged that from the beginning of its purchases, ValueAct “anticipated influencing the business decisions of the companies as the merger process unfolded.” Halliburton and Baker Hughes eventually scrapped the deal in May after the government filed an antitrust suit to block it.

“ValueAct was not entitled to avoid the HSR requirements by claiming to be a passive investor, while at the same time injecting itself” into the merger process, said Renata Hesse, head of the Justice Department’s Antitrust Division.