DoJ sues Halliburton and Baker Hughes

THE US Department of Justice (DoJ) has filed a law suit to block oilfield services company Halliburton from purchasing its competitor Baker Hughes.

The DoJ claims the deal threatens to eliminate competition, raise prices, and reduce innovation in the industry. The merger, valued at approximately US$35bn in 2014 will create a single large company if the deal is allowed to proceed.

Bill Baer, assistant attorney general in the DoJ’s Antitrust Division, said, “Halliburton and Baker Hughes are two of the three largest integrated oilfield service companies across the globe, and they compete to invent and sell products and services that are critical to energy exploration and production. We need to maintain meaningful competition in this important sector of our economy.”

The companies have agreed to sell assets to make the deal fairer for regulators to accept, however, the DoJ said the proposed assets sales were not complete business units, would not give prospective buyers any competitive advantage, and would allow Halliburton to retain the most valuable assets.

Halliburton said it intends to “vigorously contest” the allegations, claiming the DoJ has reached the wrong conclusion in its assessment, and the deal is “pro-competitive”.

Halliburton and Baker Hughes previously agreed to an approval deadline of 30 April 2016. The DoJ’s law suit is likely to extend the approval time, in which case the companies must discuss extending or cancelling the merger. In the case of cancellation, Halliburton could be forced to pay Baker Hughes a US$3.5bn break-up fee.