The Feds Don't Seem Thrilled With the Halliburton/Baker Hughes Merger

The Feds Don't Seem Thrilled With the Halliburton/Baker Hughes Merger
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Update 4:05 p.m.: The Houston Chronicle is reporting that the feds are now planning to block the merger between oilfield services giants Baker Hughes and Halliburton. Via the Chron: "Regulators are preparing to file a lawsuit blocking the merger between Baker Hughes and Halliburton, according to a person familiar with the matter."

We'll keep you updated as we learn more. 

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(Original story)

After months of assumed ambivalence, the U.S. Justice Department has finally tipped its hand and shown what the antitrust regulators actually think of the proposed merger between Halliburton and Baker Hughes, the second- and third-largest oil field services companies in the United States, respectively. 

They're definitely not entirely for it, judging from government statements in a recently filed lawsuit. 

The merger was announced in November 2014 and at the time, there were blithe assurances from company leaders that the two Houston-based companies would close on the agreement by spring 2015. But that's not how the deal has played out. Instead, the $34.6 billion merger that would combine the two longtime industry rivals into one mammoth company has been languishing on the back burner for more than a year now while company officials have awaited clearance from the Justice Department's antitrust regulators. 

Justice Department investigations like this one are usually confidential, but we've been given a hint about why the department may be dragging its feet on making a decision about merging the two Houston-based companies.

On Monday, the DOJ filed a lawsuit against ValueAct Capital Management, which bought a large amount of stock and became one of the largest shareholders in both companies without getting any clearance from the government. The government claims ValueAct used its stakes to gain access to management, learn information about the merger review and attempt to improve the chances that the deal would close, said the U.S., which is seeking a $19 million penalty, as Bloomberg first reported. 

And, as a part of that lawsuit, we finally get to see what the feds really think of the proposed merger. In its filing, the DOJ states that the companies had agreed to "a merger that threatens to substantially lessen competition in numerous markets."

The two oil field services companies, both of which have undergone layoffs because of the oil bust, have continued to wait on the DOJ antitrust regulators, pushing back their self-imposed closing deadline for the deal numerous times. Now, supposedly, the merger will be called off entirely if they can't close by the end of April.

Meanwhile, the Justice Department isn't the only regulatory agency dragging its feet about making a decision on the planned takeover. The merger has been approved in Canada, Colombia, Ecuador, Kazakhstan, South Africa and Turkey so far, but not every country is on board. 

Australia shot down the proposal entirely. The European Union rejected the merger once, and the EU's regulatory arm, the European Commission, is putting the deal through a more intensive antitrust probe, as we've previously reported. Every time one of the companies doesn't provide the information the EU antitrust regulators request in a timely manner, the entire review is halted, pushing the deadline further back. 

However, considering the Justice Department stance, the EU decision may be moot by the time it's made. 


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