The Justice Department in the U.S. has filed suit Wednesday to stop Baker Hughes from being acquired by Halliburton Co, arguing that the combination of the second and third largest oil services would hurt the competition in that sector.
The deal, which was worth over $35 million when first announced in November of 2014, would eliminate all competition for the U.S. in 23 services or products for oil exploration and production in the U.S., both on- and offshore, said the Justice Department in its statement.
The proposed merger between Baker Hughes and Halliburton would eliminate significant competition, skew the energy markets and cause harm to consumers in the U.S., said Loretta Lynch the Attorney General in a prepared statement.
The Department of Justice said Halliburton offered divestitures aimed at securing this deal but that they had been inadequate.
Bill Baer the Justice Department’s head of the Antitrust Division said he had seen many problematic mergers over the years, but never one that posed so many problems with antitrust in some many different markets. He explained that to reporters during a Wednesday morning conference call.
In prepared statement released by Halliburton, the company said it would contest the lawsuit vigorously.
The companies believe that the Justice Department has reached a conclusion that is not correct in its overall assessment of this transaction and that the lawsuit is counterproductive, especially regarding the context of the challenges the global and U.S. energy industry are experiencing currently.
If this deal were to collapse because of concerns with antitrust, Halliburton must pay Baker Hughes a $3.5 billion fee for the breakup, according to filings with a federal regulatory agency.
Halliburton shares were up by 5.9% by midday on Wednesday, while at the same time, shares of Baker Hughes rose by over 7.3% on Wall Street.
Halliburton has signed two litigators that specialize in antitrust Stephen Weissman from Baker Botts LLP and Richard Parker from O’Melveny & Myers, to handle this case according to people who are close to this matter but requested their names not be released.