The Govt. of the United States on Wednesday had filed a lawsuit to block Halliburton Co from buying the Baker Hughes Inc., arguing that the combination of #2 & #3 oil services companies would result in the greater prices in sector.
The move that comes after the months of discussions on divestitures of some corresponding businesses, considerably cuts the probabilities of deal going through, though Halliburton said that it would “vigorously contest” the litigation.
The Justice Department said that the merger that was worth 35 billion dollars when it was 1st announced in Nov. 2014 would leave only 2 dominant suppliers in twenty business lines in global well drilling & the oil construction services industry, with Schlumberger NV being 1 of the2.
“The proposed deal between Baker Hughes & Halliburton would eliminate the vital competition, skew energy markets & harm American consumers,” said Gen. Loretta Lynch, the U.S. Attorney in a statement.
“Our action makes clear that Justice Department is committed to vigorously enforcing our antitrust laws,” she added.
The Justice Department had stated that Halliburton had presented divestitures meant to save the deal but were scarce.
“I’ve seen a lot of problematic mergers in my time. But I’ve never seen one that poses so many antitrust problems in so many markets,” said the head of Justice Department’s Antitrust Division, Bill Baer.
Halliburton however stroked down. “The companies believe that the Justice Department has reached the wrong conclusion in its assessment of transaction & that its action is counter-productive, especially in context of the challenges the U.S. & global energy industry are currently experiencing,” said the company in a statement.
The companies also face problems with the European antitrust regulators that last month stopped scrutiny of deal for a 2nd time, saying that the companies had yet to offer an vital piece of information.
Halliburton shares were up 6.9% on Wednesday at 36.76 dollars whereas Baker Hughes shares were up 8% at 42.65 dollars.
According to the regulatory filings, if the deal collapses due to antitrust apprehensions, Halliburton need to pay the Baker Hughes 3.5 billion dollars of breakup fee.
Despite that, the Wall Street analysts generally decided that Halliburton would be in recovered shape than the Baker Hughes if deal fell through.
“Halliburton would be fine if the deal did not go through, even with the breakup fee,” said Rob Desai, who is an analyst with Edward Jones.