US sues ValueAct over Halliburton-Baker Hughes deal

The US Department of Justice has filed a lawsuit against the activist hedge fund ValueAct, saying it violated anti-competition rules when it took stakes in Halliburton and Baker Hughes when they announced merger plans in 2014.

Assistant Attorney General Bill Baer of the DoJ’s Antitrust Division said that, because ValueAct planned to influence the deal, it had to abide by the same stakebuilding rules as the companies themselves, reports Stephen Foley in New York.

“ValueAct’s substantial stock purchases made it one of the largest shareholders of two competitors in the midst of our antitrust review of the companies’ proposed merger, and ValueAct used its position to influence decision-making at both companies.”

Under the Hart-Scott-Rodino Act of 1976, which was designed to pause takeover bids that might cause competition concerns, companies have to notify the authorities before closing a transaction above a specific threshold set by regulators. Passive investments, which do not try to influence management decisions and the running of a company, are exempt from making the notification.

ValueAct has a statement out saying it “fundamentally disagrees” with the DoJ’s interpretation of the rules and says it will have a chilling effect on activism.

“ValueAct strongly believes in the most basic principles of shareholder rights. This includes having a relationship with company management, conducting due diligence on investments, and engaging in ordinary course communications with other shareholders. As a result, we see no alternative but to contest the Department of Justice’s action and will vigorously defend our position.”