BY Fraser Tennant
Oilfield services giants Halliburton Company and Baker Hughes Incorporated have terminated their $28bn merger agreement following a far-reaching regulatory review.
The review, which involved both US and European antitrust regulators, culminated in the US Department of Justice (DOJ) stating last month that it intended to block the deal.
In a statement, the DOJ explained that the deal would have resulted in just two dominant entities in this business: the newly formed company (Halliburton and Baker Hughes) and Schlumberger, the world's largest oil services company.
"The companies' decision to abandon this transaction — which would have left many oilfield service markets in the hands of a duopoly — is a victory for the US economy and for all Americans," said US attorney general Loretta E. Lynch.
The DOJ statement also opines that the merger would have "raised prices, decreased output and lessened innovation in at least 23 oilfield products and services critical to the nation's energy supply".
The merger, originally valued at $34.6bn, was first announced in November 2014.
“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,” said Dave Lesar, chairman and chief executive of Halliburton, one of the world's largest providers of products and services to the energy industry.
As part of the termination of the merger agreement, Halliburton is to pay Baker Hughes a termination fee of $3.5bn by Wednesday 4 May 2016.
“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,” said Martin Craighead, chairman and chief executive of Baker Hughes, a leading supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry.
Continued Mr Craighead: “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.”