U.S.

suestoblockHalliburtonBaker
Hughesdeal,sayingitwouldharm
consumers

DianeBartzandTerryWade,Reuters|April6,20162:36PMET
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APPhoto/DavidZalubowski,FileTheJusticeDepartmentsaidthatHalliburtonhadoffereddivestituresaimedat
savingthedealbutthatthesewereinadequate.
WASHINGTON/HOUSTONTheU.S.governmentfiledalawsuitonWednesdaytostopHalliburtonCo
frombuyingBakerHughesInc,arguingthecombinationoftheNo.2andNo.3oilservicescompanieswould
leadtohigherpricesinthesector.
Themove,whichcomesaftermonthsoftalksondivestituresofsomeoverlappingbusinesses,significantlycuts
thechancesofthedealgoingthrough,althoughHalliburtonsaiditwouldvigorouslycontestthelawsuit.
TheJusticeDepartmentsaidthemerger,valuedatUS$35billionwhenitwasfirstannouncedinNovember
2014,wouldleaveonlytwodominantsuppliersin20businesslinesintheglobalwelldrillingandoil
constructionservicesindustry,withSchlumbergerNVbeingoneofthetwo.
In11ofthoselines,rangingfromoffshorewellcementingtoonshorefrackingplugs,acombinedHalliburton
BakerHugheswouldhavemorethan50percentofthemarketandintwocasesmorethan80percentofthe
market.
TheproposeddealbetweenHalliburtonandBakerHugheswouldeliminatevitalcompetition,skewenergy
marketsandharmAmericanconsumers,U.S.AttorneyGeneralLorettaLynchsaidinastatementon
Wednesday.OuractionmakesclearthattheJusticeDepartmentiscommittedtovigorouslyenforcingour
antitrustlaws.

TheJusticeDepartmentsaidthatHalliburtonhadoffereddivestituresaimedatsavingthedealbutthatthese
wereinadequate.
Ihaveseenalotofproblematicmergersinmytime.ButIhaveneverseenonethatposessomanyantitrust
problemsinsomanymarkets,saidBillBaer,headoftheJusticeDepartmentsAntitrustDivision,ina
conferencecallwithreporters.
Halliburtondisagreed.ThecompaniesbelievethattheDOJ(JusticeDepartment)hasreachedthewrong
conclusioninitsassessmentofthetransactionandthatitsactioniscounterproductive,especiallyinthecontext
ofthechallengestheU.S.andglobalenergyindustryarecurrentlyexperiencing,thecompanysaidina
statement.
ThecompaniesalsofacedifficultieswithEuropeanantitrustregulators,whichlastmonthhaltedscrutinyofthe
dealforasecondtime,sayingthecompanieshadyettoprovideanimportantpieceofinformation.
Halliburtonshareswereup6.9percentonWednesdayatUS$36.76whileBakerHughesshareswereup8per
centatUS$42.65.
BasedonHalliburtonslatestshareprice,thedealwouldbeworthUS$26billion.Thecompanysshareshave
tumbledmorethan35percentoverthepasttwoyearsasaslumpingoilpricehashurtitscustomers.
WALLSTREETREACTS
Ifthedealcollapsesduetoantitrustconcerns,HalliburtonmustpayBakerHughesaUS$3.5billionbreakupfee,
accordingtoregulatoryfilings.
Despitethat,WallStreetanalystsgenerallyagreedHalliburtonwouldbeinbettershapethanBakerHughesif
thedealfellthrough.
Halliburtonwouldbejustfineifthedealdidntgothrough,evenwiththebreakupfee,saidRobDesai,an
analystwithEdwardJones.
Halliburtonsprofitmarginswouldimproveonastandalonebasisbecauseithadkeptarelativelyhighcost
structureandwasholdingoffondeepercutbacksuntilafterthedealclosed,analystssaid.Withoutthe
distractionsofintegrationwork,itcouldalsobemoreagile,theysaid.
EvercoreISIsJamesWestsaidHalliburtonsstockpricecouldimprovetoUS$42ashare,orUS$45excluding
thebreakupfee,whichisworthUS$2.65ashare.
BakerHughes,astheacquisitiontarget,wasseenasfacinggreaterdifficultiesifthedealdoesnotgoahead.
Giventheemployeeturnover,thecannibalizationofitsequipmentattheonsetofthedownturn,andthegeneral
disorderwithinthecompany,webelievestandaloneBakerHughesrevenuegrowthandmarginimprovement
wouldlagitspeers,Westsaidinanote.
ThomsonReuters2016