April 6: The US Justice
Department will file a lawsuit as soon as this week to stop oilfield
services provider Halliburton Co from acquiring smaller rival Baker
Hughes Inc, a source familiar with the matter said on Tuesday.
antitrust lawsuit could potentially scupper the deal that was first
announced in November 2014 to combine the No. 2 and No. 3 oil services
companies. Since then, oil prices have fallen by more than 55 per cent.
with opposition from the Justice Department, the companies may either
cancel the planned tie-up or fight the government in court. The deal is
one of several that antitrust enforcers have rejected as illegal during
the recent wave of mergers of large, complex companies.
for Baker Hughes closed down 5.1 per cent at $39.36 Tuesday while
Halliburton ended up 1.2 per cent at $34.40. Halliburton and Baker
Hughes both declined comment.
The two sides had been discussing asset
sales aimed at saving the deal, which was originally valued at $35
billion but is now valued at about $25 billion based on the decline in
If the deal collapses due to antitrust concerns,
Halliburton must pay Baker Hughes a $3.5 billion breakup fee, according
to regulatory filings.
The proposed deal also has hit headwinds in
Europe, where the European Union's competition authority was concerned
that the proposed merger would reduce competition and innovation in more
than 30 product markets. Regulators in Australia also flagged concerns
about the massive tie-up.
As far back as July 2015, Reuters reported
that there were concerns in the US government that the merger would lead
to higher prices and less innovation.
The Justice Department's worry
then focused on two areas. One was that the drilling technology
businesses that were divested would go to small companies that could not
effectively compete with the two leaders. The other was that the
leaders would have less incentive to innovate.
Baker Hughes in
particular has been aggressive in developing new oilfield technologies,
part of its appeal to Halliburton from the beginning. Baker Hughes
developed smartphone apps to help customers in the field decide in real
time how best to hydraulically fracture new wells.
uniting Halliburton and Baker Hughes would create a dominant leader in
North Dakota with more than half the cementing market and a leading
position in fracking.
Lower oil prices had given investors hope that
the companies' best path forward was together, especially as demand for
their products and services evaporate as customers slashed budgets.
Justice Department and Federal Trade Commission, which enforce
antitrust law, have filed lawsuits to stop a surprising number of deals
in the past 18 months.
The FTC stopped food distribution giant Sysco
Corp from buying US Foods Inc in 2015, and is currently in court
fighting Staples' merger with Office Depot. ?Reuters