US DoJ Blocking Halliburton-Baker Hughes Merger

The US Justice Department filed an antitrust case asking the U.S. District Court in Delaware to block Halliburton’s proposed acquisition of Baker Hughes.

The Justice Department claims that an investigation into the proposed merger revealed serious antitrust problems in numerous markets representing billions of dollars of revenue.

“We found 23 product and service markets where the merger would cause a substantial lessening of competition,” says Assistant Attorney General Bill Baer.

“In many of these markets, the merger would leave the industry with just two dominant suppliers – a virtual duopoly.”

Aside to the competition issues raised in the US, Baer added that the merger is the subject of investigations about its effects on competition in multiple jurisdictions, including Europe, Australia, Mexico and Brazil.

Halliburton has been claiming publicly from day one that it can fix any and all competition concerns, in the United States, in Europe and around the world.

“Now, I know the companies do claim that they can overcome these fundamental antitrust problems by offering to divest a mix and match of assets in some of the markets,” Attorney General Loretta E. Lynch said.

“And the proposal put forth by the companies fails to address our concerns.  The proposal is complicated, risky and regulatory, but most importantly, it falls far short of preserving – much less enhancing – the current competitive dynamic.  Simply put, the parties’ merger puts competition at risk in too many markets.”

Halliburton and Baker Hughes said in a joint statement that they intend to vigorously contest the DOJ’s effort to block their pending merger.

The companies believe that the DOJ has reached the wrong conclusion in its assessment of the transaction and that its action is counterproductive, especially in the context of the challenges the U.S. and global energy industry are currently experiencing.

The duo agreed to extend the time period to obtain regulatory approvals to no later than April 30, 2016. If the judicial review extends beyond April 30, 2016, the parties may continue to seek relevant regulatory approvals or either terminate the merger agreement.