Halliburton Bid for Baker Hughes in Limbo as Deadline Looms

  • Companies said to have made final pitch to antitrust chief
  • Justice Department lawsuit may come next week if no extension

Halliburton Co.’s takeover bid for Baker Hughes Inc. has come down to the wire with the U.S. Justice Department, which may decide this week whether to approve the deal after months of negotiations.

Halliburton has presented a package of proposed asset sales to antitrust officials in hopes of allaying their concerns that the tie-up between the No. 2 and No. 3 players in the oil-services industry would be anticompetitive. A recent meeting was held with Bill Baer, the head of the Justice Department’s antitrust division, who will make the final decision, said a person familiar with the discussions. The meeting is a sign the review is drawing to a close.

The companies don’t know whether the government will accept their proposals or file a lawsuit to block the deal, the person said. Both sides could agree to continue discussions beyond the Dec. 15 deadline, but hadn’t negotiated an extension as of late last week, the person said.

Baker Hughes fell as much as 10 percent, the biggest intraday fall since Aug. 24, and was down 8.4 percent at $43.75 at 12:09 p.m. in New York. Halliburton slipped 1.7 percent.

Representatives for Halliburton and Baker Hughes, as well as Mark Abueg, a Justice Department spokesman, declined to comment.

Concerned Regulators

Outside the U.S., Halliburton must contend with antitrust officials at the European Commission, who are also reviewing the transaction, and in Australia and Brazil, where regulators have expressed concerns about the deal.

Halliburton has fallen 6 percent this year, while Baker Hughes has dropped 15 percent. The 15-member Philadelphia Oil Services Index has slipped 24 percent in the same period.

The combination has been fraught from the beginning. The companies faced early resistance from U.S. officials, who were concerned the tie-up could hurt competition because it would reduce the top three players to two, a person familiar with the matter told Bloomberg News in July. The officials were concerned that the oilfield services industry would become too concentrated and that proposed asset sales didn’t go far enough, the person said.

European Delay

In November, the company sought European approval for the takeover a second time, four months after regulators rejected an earlier filing on the bid. The initial deadline for the new filing has been set for Jan. 12.

Australia’s competition watchdog has queried the transaction, and delayed its decision until Dec. 17 after asking for more comments from market participants. Brazil’s antitrust regulator challenged the transaction Dec. 7, but a final decision may not be made for another 240 days.

Halliburton said the Brazilian challenge was a “normal step” in the regulator’s process and the transaction has won regulatory approval in Canada, Colombia, Kazakhstan, South Africa and Turkey.

U.S. antitrust enforcers are responding forcefully to the flurry of mergers in highly concentrated industries and may be emboldened by some recent victories. Last week the the Federal Trade Commission surprised some antitrust experts when it moved to block Staples Inc.’s merger with Office Depot Inc. after waving through Office Depot’s tie-up with Office Max in 2013.

General Electric Co. abandoned plans to sell its appliance business to Electrolux AB earlier this month in the middle of a Justice Department lawsuit seeking to block the deal. Comcast Corp. dropped its bid to buy Time Warner Cable Inc. in April because of firm objections by the Justice Department and a regulator. Mega deals pending in industries including health insurance, drug stores, pharmaceuticals and chemicals are also certain to get careful review.

Building Scale

Halliburton announced the takeover in November 2014  to better compete against industry leader Schlumberger Ltd. by achieving scale and building a broader technology portfolio in a market where the ability to innovate is increasingly critical for success. The deal’s value is now about $26 billion, down from $34.6 billion at the time of the announcement. 

Schlumberger would remain about two-thirds larger than the combined company. To seek approval, Halliburton and Baker Hughes said they would divest assets that generate as much as $7.5 billion in revenue, including those vital for building new wells and for controlling the flow of oil.

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