Energy

Halliburton and Baker Hughes Plan to Fight Justice Department Lawsuit

Chris Lange

Published: April 6, 2016 11:40 am

Last Updated: January 13, 2020 11:05 am

Halliburton Co. (NYSE: HAL) and Baker Hughes Inc. (NYSE: BHI) are taking a stand against the U.S. Department of Justice’s most recent effort to block their intended merger. The companies ultimately believe that the Justice Department reached the wrong conclusion in its assessment, especially in the context of the challenges the U.S. and global energy industries are currently experiencing.

In November 2014, Halliburton and Baker Hughes announced an agreement under which Halliburton would pay $35 billion for Baker Hughes, a premium of around 40% at the time. The deal was expected to close by the end of 2015, but it is still trapped in a regulatory embrace that may strangle it.

Also, if the merger is not completed, Halliburton is on the hook for a $3.5 billion breakup fee. The Washington Post report noted that the Justice Department may choose to announce a decision on the merger at this week’s American Bar Association annual antitrust conference.

According to a press release from the companies:

The proposed merger of Halliburton and Baker Hughes is pro-competitive and will allow the companies’ customers to benefit from a more flexible, innovative, and efficient oilfield services company. 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.

Early in the process, Halliburton proposed to the DOJ a divestiture package worth billions of dollars that will facilitate the entry of new competition in markets in which products and services are being divested. Both companies strongly believe that the proposed divestiture package, which was significantly enhanced, is more than sufficient to address the DOJ’s specific competitive concerns.

The companies intend to demonstrate that the DOJ has underestimated the highly competitive nature of the oilfield services industry, the many benefits of the proposed combination, and the sufficiency of the divestitures. Once completed, the transaction will allow customers to operate more cost effectively, which is especially important now due to the state of the energy industry and oil and gas prices.

Halliburton and Baker Hughes look forward to a full, impartial judicial review of the pending transaction, including the sufficiency of the proposed divestitures.

Shares of Halliburton were trading up 5.5% at $36.29 on Wednesday, with a consensus analyst price target of $40.60 and a 52-week trading range of $27.64 to $50.20.

Baker Hughes traded up 8% at $42.50, with a consensus price target of $57.65 and a 52-week range of $37.58 to $70.45.