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From Antitrust Law Daily, April 6, 2016

Antitrust Division sues to block Halliburton, Baker Hughes deal

By Greg Hammond, J.D.

Halliburton Co.’s proposed acquisition of Baker Hughes Inc. would eliminate substantial head-to-head competition and would likely lead to higher prices and less innovation, according to a complaint filed today by the Justice Department Antitrust Division in the federal district court in Wilmington, Delaware. The complaint was filed just two days after the Antitrust Division brought an action in the federal district court in San Francisco, claiming that recent acquisitions by two ValueAct investment funds of over $2.5 billion of voting securities of Halliburton and Baker Hughes violated the reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (U.S. v. Halliburton Co., April 6, 2016).

“This transaction is unprecedented in the breadth and scope of competitive overlaps and antitrust issues it presents,” stated Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “Halliburton and Baker Hughes are two of the three largest integrated oilfield service companies across the globe, and they compete to invent and sell products and services that are critical to energy exploration and production. We need to maintain meaningful competition in this important sector of our economy.”

The complaint asserts that competition may be substantially lessened in 23 relevant markets if the acquisition goes through, including the markets for offshore directional drilling services, offshore logging while drilling services, onshore logging while drilling services, fixed cutter drill bits, and roller cone drill bits.

In addition, the Antitrust Division alleges that the elimination of competition between Halliburton and Baker Hughes would have more profound anticompetitive effects than market shares and HHI measures alone would indicate, including unilateral effects in the form of higher prices, lower service levels, and less innovation, as well as greater coordination among the remaining competitors.

The Justice Department seeks a permanent injunction that will prohibit Baker Hughes and Halliburton from carrying out their planned acquisition, or any other transaction that would combine the two companies. In addition, the complaint requests that the United States be awarded costs of suit.

Halliburton, Baker Hughes response. Halliburton and Baker Hughes released a statement today, declaring their intent to “vigorously contest” the Justice Department’s effort to block the proposed transaction. “The proposed merger of Halliburton and Baker Hughes is pro-competitive and will allow the companies’ customers to benefit from a more flexible, innovative, and efficient oilfield services company,” the statement reads. “The transaction will provide customers with access to high quality and more efficient products and services, and an opportunity to reduce their cost per barrel of oil equivalent.”

Companies: Halliburton Co.; Baker Hughes Inc.

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