Justice Department will sue to block Halliburton-Baker Hughes merger

By Mike Lee | 04/06/2016 07:48 AM EDT

The Justice Department could file a lawsuit as soon as today to block the $35 billion merger of Halliburton Co. and Baker Hughes Inc., according to a person familiar with the matter.

The Justice Department’s Antitrust Division has been investigating the proposed buyout for more than a year, as have officials in the European Union and other regions. David Gelfand, deputy assistant attorney general for litigation for the Department of Justice’s Antitrust Division, confirmed the lawsuit this morning.

A Halliburton spokeswoman declined to comment on the potential lawsuit.

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Halliburton and Baker Hughes are the second- and third-largest providers of hydraulic fracturing and other oil field services, and antitrust concerns have followed the deal since it was announced in November 2014 (EnergyWire, Dec. 23, 2014).

Oil field services are among the biggest costs for oil producers, and analysts have said that allowing the two companies to combine might create a barrier for smaller companies to enter the market, while not creating enough competition to lower prices (EnergyWire, Feb. 11, 2015).

To quell those worries, Halliburton agreed in 2014 to sell as much as $7.5 billion of the combined company’s assets and also promised to pay Baker Hughes an unusually large $3.5 billion fee if the deal doesn’t go through.

In January, Halliburton said it had submitted a larger package of divestitures for approval by the Justice Department (EnergyWire, Jan. 26).

The transaction was supposed to have closed last year, though, and the companies have set an April 30 deadline to complete it.

On Monday, the Justice Department’s Antitrust Division sued a California investment fund, alleging it had failed to disclose that it had bought a large stake in both companies. The fund, ValueAct Capital, used its ownership in both companies to press for the deal to go through (EnergyWire, April 5).

The Justice Department didn’t accuse ValueAct of any wrongdoing besides failing to report its stock purchases and failing to observe a waiting period. But it said in the suit that the Halliburton-Baker Hughes merger "threatens to substantially lessen competition in numerous markets."

Reporter Ellen M. Gilmer contributed.

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