Government’s Objection Brings Merger of Halliburton and Baker Hughes to a Halt

The $28 billion dollar merger between Halliburton and Baker Hughes, both headquartered in Houston was cancelled Sunday.

The Securities and Exchange Commission was notified early Monday by the two companies after the Justice Department filed a civil complaint April 6 to stop the merger, claiming it would create a company so large that it would eliminate most competition.

It was a proposed merger involving the world’s number two and number three oil services companies. The DOJ opposed it as well as European antitrust regulators.

“The Complaint alleges that the proposed transaction between Halliburton and Baker Hughes would violate Section 7 of the Clayton Act,” stated Baker Hughes in its SEC filing. “Subsequent to the filing of the Complaint, on April 30, 2016, the Merger Agreement with Halliburton was terminated….”

The two had announced in November 2014 that they had entered into an agreement and plan of merger under which Halliburton would acquire all of the outstanding shares of Baker Hughes. At the time of the announcement, the deal was worth nearly $35 billion dollars but since the downturn in the energy sector, its value has dropped to about $28 billion.

“In accordance with the provisions of Section 9.1 of the Merger Agreement, Baker Hughes and Halliburton agreed to terminate the Merger Agreement on April 30, 2016 due to the inability to achieve certain specified antitrust related approvals,” read the SEC filing. “Halliburton has agreed to pay $3.5 billion to Baker Hughes, on or before May 4, 2016 representing the antitrust termination fee required to be paid pursuant Merger Agreement.”

The filing indicated Baker Hughes had incurred costs related to the merger of $102 million and $28 million for the tree months ended March 31, 2016 and 2015.

The announcement also produced a statement from U.S. Attorney General Loretta Lynch.

“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 Lynch.

 

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