Halliburton and Baker Hughes call off merger

MAY 2, 2016 —The Department of Justice announced May 1 that Halliburton and Baker Hughes have abandoned their planned merger, originally valued at $34 billion.

The department filed suit on April 6, 2016, to block the merger, alleging that the transaction would unlawfully eliminate significant head-to-head competition between the companies in at least 23 markets crucial to the exploration and production of oil and natural gas in the United States.

“The companies’ decision to abandon this transaction – which would have left many oilfield service markets in the hands of a duopoly – is a victory for the U.S. economy and for all Americans,” said Attorney General Loretta E. Lynch. “This case serves as a stark reminder that no merger is too big or too complex to be challenged, and that the hardworking men and women of the department’s Antitrust Division stand ready, willing and able to vigorously enforce the nation’s antitrust laws when companies propose deals that would enhance shareholder value at the expense of consumer interests.”

“Very few things are as important to our economy as oil and gas,” said Deputy Assistant Attorney General David I. Gelfand of the Justice Department’s Antitrust Division. “But the merger of Halliburton and Baker Hughes would have raised prices, decreased output and lessened innovation in at least 23 oilfield products and services critical to the nation’s energy supply. We achieved the only result that could adequately protect American consumers – an abandonment of this unlawful merger. We thank our enforcement partners around the world, especially from the European Commission, Australia, Brazil and Mexico, for their close and constructive collaboration on this matter.”

Before the lawsuit was filed, Halliburton had offered to divest certain assets in an effort to address the department’s competitive concerns. According to the Justice Department complaint, however, the proposal was inadequate because it did not include full business units, withheld many critical assets and personnel, involved numerous ongoing entanglements between the merged company and the divestiture buyer and generally failed to replicate the robust competition between the parties that exists today.

Commenting on the decision to call of the wedding, Halliburton Chairman and CEO Dave Lesar said that “challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action.”

“This was an extremely complex, global transaction and, ultimately, a solution could not be found to satisfy the antitrust concerns of regulators, both in the United States and abroad,” said Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes.

Halliburton will pay Baker Hughes a termination fee of $3.5 billion by Wednesday, May 4, 2016.