US seeks to block Halliburton-Baker Hughes deal

Halliburton’s proposed $25bn takeover of rival oil services group Baker Hughes could become the latest deal to come undone after the US Department of Justice sued to block the transaction.

In a lawsuit filed by the DoJ on Wednesday, anti-trust regulators argued that the tie-up “threatens to eliminate competition, raise prices and reduce innovation in the oilfield services industry.”

Attorney General Loretta E. Lynch said in a statement:

The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers. Our action makes clear that the Justice Department is committed to vigorously enforcing our antitrust laws. In the days ahead, we will continue to stand up for fair deals and free markets, and for the American people we are privileged to serve.

And Attorney General Bill Baer of the department’s Antitrust Division added:

This transaction is unprecedented in the breadth and scope of competitive overlaps and antitrust issues it presents. 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.

Although Halliburton had offered to sell off some assets from the two companies, the DoJ said the proposal did not go far enough to address its concerns and that the divestitures would allow Halliburton would retain more valuable assets and sell “less significant” ones. Moreover, the complaint alleged that the “divesture would not replicate the substantial competition between the two rivals that exists today”.

Halliburton said in a statement that it planed to “vigorously contest” the lawsuit and argued that the deal would help their customers cope with low commodity prices by improving the efficiency of the merged businesses.

The companies believe that the DOJ has reached the wrong conclusion in its assessment of the transaction and that its action is counterproductive, especially in the context of the challenges the U.S. and global energy industry are currently experiencing.