Should the merger proceed, the only remaining company of similar scale and market share to compete would be Houston-based Schlumberger Limited (NYSE: SLB), the world’s largest in oilfield services with roughly 95,000 employees globally.
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“The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers”, said Attorney General Loretta Lynch in a statement Wednesday.
In a joint statement, the companies said they “intend to vigorously contest” the government’s attempt to block the merger, arguing that the deal was “pro-competitive and will allow the companies’ customers to benefit from a more flexible innovative and efficient oil services company”.
The transaction was scheduled to close past year but has been delayed as the companies grapple with antitrust concerns raised by competition authorities.
The Justice Department said it wasn’t satisfied by Halliburton’s overtures, as the businesses they proposed to sell were not full business units, but groups of assets from certain business lines.
The Justice Department filed an antitrust lawsuit to block the transaction as regulators claim the acquisition will eliminate competition for 23 services in the oil industry.
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.
Share prices for Baker Hughes closed down 5.1 per cent at $US39.36 late Tuesday afternoon while Halliburton ended up 1.2 per cent at $US34.40.
The merger deal of the No. 2 and 3 oilfield service providers had drawn intense scrutiny, and proposals for selling off assets didn’t satisfy regulators. Without the distractions of integration work, it could also be more agile, they said. Baker Hughes has also laid off thousands of workers. That meant it was required to report the stake to antitrust officials, the US said in the lawsuit filed Monday.
The Justice Department’s worry at that time focused on two areas, the source said.
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The companies said that they expect regulatory approvals of the deal by April 30 and that if the judicial review extends beyond that period, “the parties may continue to seek relevant regulatory approvals or either of the parties may terminate the merger agreement”. Bill Herbert, an analyst from Simmons & Co said “Baker Hughes has great technology, but there has always been this mystifying imbalance between the technology platform and their operational results”.
