May 12, 2016

Federal regulators continue antitrust crackdown on mergers

The Halliburton-Baker Hughes merger  has been terminated after pressure from federal regulators over antitrust concerns.

Halliburton, the world's second-largest oil field service organizations, sought to buy Baker Hughes, the third-biggest oil field service company, for $34.6 billion in November 2014. Since then, the two companies have fiercely battled federal regulators over various antitrust concerns, eventually culminating in the U.S. Department of Justice suing to stop the merger on April 6, according to Forbes.

A failed deal
Now, around a month after this lawsuit began, Halliburton and Baker Hughes announced that they will be terminating their deal. While this failed merger is a nominal win for antitrust federal regulators, as outlined in the terms of the deal, Halliburton awarded Baker Hughes a $3.5 billion termination fee. This latest challenged merger is just one of many, in what certain industry analysts believe to be increasingly aggressive antitrust lawsuits against potential mergers of industry leaders. Some of these include the failed notable Pfizer-Allergan and Comcast-Time Warner Cable deals.

Deputy Assistant Attorney General David Gelfand of the Justice Department's Antitrust Division was adamantly opposed to the oil giants' potential merger. Gelfand stated that should this deal have passed regulatory approval, the newly combined company would have raised prices and unlawfully eliminated healthy competition from 23 oil and gas marketplaces around the U.S., according to Legal Newsline. Attorney General Loretta Lynch agreed, stating the failed merger is a victory for the American people, as the ruling protects inherit consumer rights.

The outcome is disappointing'
Following the merger's termination, Dave Lesar, chairman and chief executive officer of Halliburton, thanked both his company's employees and those at Baker Hughes for working closely together since the deal was first announced in November 2014. Meanwhile, Martin Craighead, chairman and chief executive officer of Baker Hughes, stated that the "outcome is disappointing," citing both companies' unwavering belief that the deal would benefit everyone from customers to shareholders. 

"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. As we turn the page on this chapter, I want to thank our customers for their patience and continued loyalty over the past 18 months," Craighead​ said. "I also want to thank the entire Baker Hughes team for their unwavering dedication and commitment during this process. Baker Hughes is strongly positioned to build on its foundation and heritage as a technology innovator that differentiates for our customers and delivers compelling value to shareholders."

Other industry giants, like Halliburton and Baker Hughes, currently seeking regulatory approval for horizontal-type merger deals may face significant challenges over the coming months as federal decision-makers are increasingly cracking down on potential antitrust mergers.