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From Antitrust Law Daily, May 2, 2016

Halliburton, Baker Hughes abandon $34B merger

By Greg Hammond, J.D.

Halliburton Co. and Baker Hughes Inc. have abandoned plans to merge following Antitrust Division claims that the proposed transaction—originally valued at $34 billion—would eliminate substantial head-to-head competition and would likely lead to higher prices and less innovation (U.S. v. Halliburton Co., Dkt. 1:16-cv-00233-UNA).

Competition could have been substantially lessened in 23 relevant markets if the acquisition went through, according to the Justice Department’s April 6 complaint, including the markets for offshore directional drilling services, offshore logging while drilling services, onshore logging while drilling services, fixed cutter drill bits, roller cone drill bits, among others. In addition, the Antitrust Division alleged that the elimination of competition would have had 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.

"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," stated Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes. Dave Lesar, Chairman and Chief Executive Officer of Halliburton added, "While both companies expected the proposed merger to result in compelling benefits to shareholders, customers, and other stakeholders, 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."

"Very few things are as important to our economy as oil and gas," commented Deputy Assistant Attorney General David I. Gelfand. "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."

EC response. The European Commission also had opened an in-depth investigation into the acquisition in January 2016, citing serious potential competition concerns in more than 30 product and service lines, both offshore and onshore. EC Commissioner Margrethe Vestager issued a statement following Halliburton and Baker Hughes’ announcement, noting that, "In this case, based on the Commission’s in-depth analysis, the transaction raised competition concerns on a very large number of markets related to oilfield services provided to oil and gas exploration and production companies in the EEA."

Companies: Halliburton Co.; Baker Hughes Inc.

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