Department of Justice Moves to Block Halliburton-Baker Hughes Merger; Halliburton Ready for Fight

The U.S. Justice Department is seeking to block the merger of Baker Hughes and Halliburton, preventing the tie-up of the second and third largest oilfield services companies. 
DOJ filed a lawsuit against the proposed merger, which presents a major roadblock to the $35 billion merger. The lawsuit hinges on antitrust grounds, as the combined company would control too much of the oilfield services market. 
Halliburton pursued the takeover because it would streamline their businesses, lowering costs for its clients, which are exploration and production companies. But antitrust regulators are concerned about too much market power. 
The lawsuit could derail the tie-up. Halliburton and Baker Hughes could fight the Justice Department, hoping to win in court, or they could call off the merger. On Tuesday, Baker Hughes’ share price dropped 5.1 percent on the news, while Halliburton’s stock rose 1.2 percent. Baker Hughes’ shareholders would still benefit if the deal falls apart – Halliburton would be required to pay them a $3.5 billion breakup fee.
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For some services the deal would create a duopoly between Halliburton and its rival Schlumberger, with the two companies sharing 99 per cent of the US market for cementing offshore wells, for example.

Halliburton rejected those arguments, saying in a statement that the takeover was actually “pro-competitive”. It argued that the deal would cut costs for the oil and gas production companies that are its customers, because the enlarged group would be more flexible and more efficient, and those savings were “especially important now due to the state of the energy industry and oil and gas prices”.

It added that it was looking forward to a “full, impartial judicial review” of the proposed deal.

The case will be heard at the US district court in Delaware, which is where Halliburton and Baker Hughes are registered.

Halliburton says its package of planned asset sales should overcome objections to the deal. It proposed a list of disposals early on in its discussions with the DoJ, and then added further assets to that list in September.

However, the DoJ described those proposed solutions as “wholly inadequate”.
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