U.S. sues to block Halliburton-Baker Hughes deal, says anti-competitive

Wed Apr 6, 2016 1:52pm EDT
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By Diane Bartz and Terry Wade

WASHINGTON/HOUSTON (Reuters) - The U.S. government filed a lawsuit on Wednesday to stop Halliburton Co (HAL.N: Quote) from buying Baker Hughes Inc (BHI.N: Quote), arguing the combination of the No. 2 and No. 3 oil services companies would lead to higher prices in the sector.

The move, which comes after months of talks on divestitures of some overlapping businesses, significantly cuts the chances of the deal going through, although Halliburton said it would "vigorously contest" the lawsuit.

The Justice Department said the merger, valued at $35 billion when it was first announced in November 2014, would leave only two dominant suppliers in 20 business lines in the global well drilling and oil construction services industry, with Schlumberger NV (SLB.N: Quote) being one of the two.

In 11 of those lines, ranging from offshore well cementing to onshore fracking plugs, a combined Halliburton-Baker Hughes would have more than 50 percent of the market and in two cases more than 80 percent of the market.

"The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers," U.S. Attorney General Loretta Lynch said in a statement on Wednesday. "Our action makes clear that the Justice Department is committed to vigorously enforcing our antitrust laws."

The Justice Department said that Halliburton had offered divestitures aimed at saving the deal but that these were inadequate.

"I have seen a lot of problematic mergers in my time. But I have never seen one that poses so many antitrust problems in so many markets," said Bill Baer, head of the Justice Department's Antitrust Division, in a conference call with reporters.

Halliburton disagreed. "The companies believe that the DOJ (Justice Department) 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," the company said in a statement.   Continued...

Various Halliburton equipment being stored at the equipment yard in Alvarado, Texas June 2, 2015.  REUTERS/Cooper Neill