Halliburton-Baker Hughes takeover proposals fail to win over DOJ

By Kasia Patel
Published: Monday, 21 December 2015

Additional divestments not enough to satisfy anticompetitive concerns; companies receive third extension for review period.

Oilfield services providers Halliburton Co. and Baker Hughes Inc. have been informed by the Antitrust Division of the US Department of Justice (DOJ) that their takeover proposals do not go far enough to alleviate anticompetitive reservations.

As a result, the companies have had to once again extend the DOJ review period to 30 April 2016 as they look for other solutions.

"The DOJ has informed the companies that it does not believe that the remedies offered to date are sufficient to address the DOJ’s concerns, but acknowledged that they would assess further proposals and look forward to continued cooperation from the parties in their continuing investigation," Halliburton and Baker Hughes said in a joint statement.

Halliburton and Baker Hughes, which are leading producers of oilfield minerals including bentonite and barite (barytes), entered into a definitive agreement in November 2014 for the $34.6bn purchase of Baker Hughes by Halliburton.

As the second and third largest companies in the oilfield services sector following Schlumberger Ltd, news of a potential merger between the two raised competition questions, and this is the third time the antitrust review period has been extended.

Both companies have offered to divest a number of businesses to gain the approval of competition authorities.

Halliburton said it would divest its expandable liner hangers business, part of its completion and production division, after previously announced divestitures – fixed cutter and roller cone drill bits, directional drilling and logging-while-drilling (LWD)/measurement-while-drilling (MWD) – were not adequate.

Baker Hughes, meanwhile, plans to divest its core completions business, which comprises packers, flow control tools, subsurface safety systems, intelligent well systems, permanent monitoring, sand control tools and control screens.

"Both companies strongly believe that the divestiture package, which recently was significantly enhanced to address the DOJ’s specific competitive concerns, is more than sufficient to address concerns raised by competition authorities, including the DOJ," the joint statement outlined.

Halliburton and Baker Hughes both believe that the proposed merger will benefit the industry and their customers.

"The merger is expected to create a strong company and achieve substantial efficiencies enabling it to compete aggressively to provide efficient, innovative and low-cost services," the companies said. "Completion of the transaction would allow customers to operate more cost-effectively, which is increasingly important due to the current state of the energy industry and oil and gas prices."

Despite receiving unconditional clearance in Canada, Kazakhstan, South Africa and Turkey, the acquisition has yet to receive approval from any competition authority, including the European Commission (EC).