#Competition: Halliburton and Baker Hughes abandon merger following pressure from EU and US competition authorities

160502Halliburton2Halliburton and Baker Hughes abandon merger deal originally valued at $35 billion following objections from EU and US authorities. In connection with the termination of the merger agreement, Halliburton will pay Baker Hughes the termination fee of $3.5 billion.

The US Department of Justice filed a suit on 6 April, 2016, to block the merger, alleging that the transaction would unlawfully eliminate competition between the companies in at least 23 markets crucial to the exploration and production of oil and natural gas in the United States.

The European Commission had also opened an in-depth investigation in January 2016. The analysis 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. The EU reported that customers had contacted the European Commission to raise issues with the proposed transaction. The Commission emphasised that the investigation has been carried out in close cooperation with a number of competition agencies across the world including those in the US, Brazil and Australia.

Competition Commissioner Margrethe Vestager said: “The exploration and production of oil and gas are key sectors in ensuring competitive energy prices for consumers and companies across the EU. They are also particularly important for the efficient use of available gas resources within the EU, a key element of our Energy Union strategy in terms of ensuring security of supply.”

US response

Deputy Assistant Attorney General David I. Gelf, of the Justice Department’s Antitrust Division,  said: “Very few things are as important to our economy as oil and gas, 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. We thank our enforcement partners around the world, especially from the European Commission, Australia, Brazil and Mexico, for their close and constructive collaboration on this matter.”

Before the lawsuit was filed, Halliburton had offered to divest certain assets in an effort to address the department’s competitive concerns. However the Department of Justice found that the proposal was inadequate because it did not include full business units, withheld many critical assets and personnel, involved numerous ongoing entanglements between the merged company and the divestiture buyer and generally failed to replicate the robust competition between the parties that exists today.

Halliburton and Baker Hughes argue deal would have brought ‘compelling benefits’

Halliburton and Baker Hughes issued a joint statement regretting the decision of the competition authorities, arguing that the deal would have brought compelling benefits to shareholders, customers and other stakeholders. Dave Lesar, Chairman and Chief Executive Officer of Halliburton, said: “Challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led (us) to the conclusion that termination is the best course of action.”

Martin Craighead, Chairman and Chief Executive Officer of Baker Hughes said: “Today’s outcome is disappointing because of our strong belief in the vast potential of the business combination to deliver benefits for shareholders, customers and both companies’ employees. 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.”

Background

Halliburton, founded in 1919, is one of the world’s largest providers of products and services to the energy industry. With over 55,000 employees, representing 140 nationalities in over 80 countries, the company serves the upstream oil and gas industry throughout the lifecycle of the reservoir – from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.

Baker Hughes is a leading supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry. The company’s 39,000 employees today work in more than 80 countries helping customers find, evaluate, drill, produce, transport and process hydrocarbon resources.

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Category: A Frontpage, Brazil, Economy, EU, EU, European Commission, Mergers, US, World

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