The new lawsuit filed in U.S. District Court for the District of DE where both companies are incorporated, alleges that the merger “threatens to eliminate competition, raise prices and reduce innovation” in the oilfield services (OFS) industry.
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The proposed merger between Baker Hughes and Halliburton would eliminate significant competition, skew the energy markets and cause harm to consumers in the USA, said Loretta Lynch the Attorney General in a prepared statement. In a joint press statement released shortly after the legal filing, Halliburton and Baker Hughes accused the Justice Department of “reaching the wrong conclusion” in the official assessment and further labeled the civil action as “counterproductive”, especially as domestic energy companies face an enduring oil glut felt since mid-2014.
The proposed transaction, valued at almost $35 billion, would combine two of the world’s three leading providers of those services to oil and gas companies and create a bigger rival to the industry leader, Schlumberger Ltd.
The Justice Department on Wednesday filed an antitrust lawsuit challenging Halliburton Co.’s HAL, +5.93% planned acquisition of rival Baker Hughes Inc.
The Justice Department’s worry at that time focused on two areas, the source said. It was formed in 1987 with the merger of Baker International and Hughes Tool Company, both founded over 100 years ago. As per the report, General Electric Company – one of the largest and the most diversified technology and financial services firms in the world – is only willing to purchase part of the properties while Weatherford International plc (WFT – Analyst Report) dropped out.
In the summer, Halliburton and Baker Hughes responded to a second DOJ request for additional information regarding the merger following disclosures made in February 2015.
The lawsuit comes as the US oil and gas sector is grappling with the fallout of rock-bottom oil prices, which have sparked dozens of bankruptcies and more than 320,000 job cuts globally since late 2014, according to Houston consultancy Graves.
If the deal falls through for any reason, Halliburton will be forced to pay Baker Hughes a $3.5 billion break-up fee.
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Both Halliburton and Baker Hughes are fighting back, vehemently challenging the DOJ’s accusations, stating that the mega merger is pro-competitive and will allow customers to benefit from a more flexible, innovative, and efficient oilfield services company. European regulators also have expressed concerns about the deal. However, the parties may continue seeking the approval, or terminate the deal, if the judicial review extends beyond April 30. But the Justice Department said Halliburton’s proposed divestitures were insufficient and would not foster increased competition.
