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DOJ Stock-Blocks Texas-Sized HalliBaker Merger

Photo: ABC 13 Video Screenshot

HOUSTON, TEXAS – The Obama Justice Department filed an antitrust lawsuit Wednesday to block the proposed $34.6 billion merger between Houston-based oilfield services companies Halliburton (NYSE: HAL) and Baker Hughes, Inc. (NYSE: BHI). The DOJ thoroughly objected to two of the three largest of such companies in the world joining for fears of competitive threats and innovation stagnation.

A press announcement circulated by the DOJ justified its latest action by arguing the merger would eliminate “important head to head competition in markets for 23 products or services” necessary for both on and offshore energy exploration. Assistant Attorney General Bill Baer of the DOJ’s Antitrust Division noted that the “transaction is unprecedented in the breadth and scope of competitive overlaps” and antitrust concerns.

The Texas companies are not taking the lawsuit lying down. In a joint press statement released shortly after the legal filing, Halliburton and Baker Hughes accused the Justice Department of “reaching the wrong conclusion” in the official assessment and further labeled the civil action as “counterproductive,” especially as domestic energy companies face an enduring oil glut felt since mid-2014. The pair countered concerns over competitiveness directly.

“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,” the joint statement noted.

Both parties to the litigation have worked to spin a previous remedy offered by the companies to assuage the DOJ’s antitrust concerns within their respective public comments. Halliburton/Baker offered to coordinate a divestiture of assets from existing lines of business “worth billions of dollars that will facilitate the entry of new competition in markets” believing the move would prove “more than sufficient” for government reviewers. The DOJ took exception to the offer, noting in the legal complaint that rather than unloading full business units onto the market, the pair would retain plants, employees, contracts and intellectual property while dumping less desirable assets.

Should the merger proceed, the only remaining company of similar scale and market share to compete would be Houston-based Schlumberger Limited (NYSE: SLB), the world’s largest in oilfield services with roughly 95,000 employees globally. The DOJ contends the deal would give the two remaining companies 99 percent market share for services such as offshore well completions, cementing and open-hole wirelines.

Employees for the three service giants have been directly impacted by sagging oil prices in recent years. By the end of 2015, Halliburton was forced to shed more than 22,000 jobs total since the 2014 peak, according to the Houston Chronicle. To maintain its current 65,000 global payroll, the company announced reductions in 401(k) contributions and cuts to executive bonuses as well. Neighboring Schlumberger shed a total 10,000 jobs in 2015, according to Bloomberg.

The Justice Department lawsuit was filed in the United States District Court for the District of Delaware, where both companies are incorporated. The DOJ has published an official copy of the 38 complaint, here.

Logan Churchwell is a founding member of the Breitbart Texas team. You can follow him on Twitter @LCChurchwell.


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