Federal authorities reviewing the proposed Halliburton Co. HAL–Baker Hughes Inc. BHI mega merger have termed the remedies offered to mitigate antitrust concerns as insufficient, pushing back the time frame to rule on the deal.
In a joint statement on Tuesday the companies extended the closure date to no later than April 30, 2016. Halliburton and Baker Hughes said that the timing agreement with the Antitrust Division of the U.S. Department of Justice (DOJ) would be allowed to pass without reaching a settlement or the DOJ suing to block the pending transaction.
Announced in last year’s fourth quarter and originally expected to close in late November this year, the $35 billion stock-and-cash deal, if finalized, would unite the second- and third-largest oil field services providers and create a key player in the market, where Schlumberger Ltd. SLB is currently the leader.
Regulatory Status
The deal – unanimously adopted by the boards and stockholders of each firm – has already got the green light from regulatory agencies in South Africa, Turkey, Colombia, Canada, Ecuador and Kazakhstan. Apart from the U.S. DOJ, the companies are still waiting to win approval from Australia and Brazil. Even the European Commission is currently reviewing the pending tie-up with an initial deadline of Jan 12 after Halliburton refilled its application with the EU anti-trust regulators following the rejection of an earlier request on grounds of insufficient data.
Divestiture Proposals
As part of their efforts to address competition concerns and win U.S. regulatory approval for the merger, Halliburton and Baker Hughes were prepared to sell overlapping businesses worth $5.2 billion. Halliburton's well completion and production unit, two pressure pumping vessels of Baker Hughes in the Gulf of Mexico and its offshore cementing business in Australia, Brazil, the Gulf of Mexico, Norway and Britain were among properties the oilfield service companies agreed to divest.
DOJ’s Stance
Obviously, the steps announced by the companies – both carrying a Zacks Rank #3 (Hold) – failed to cut ice with the DOJ, which still believes that the merger would lead to higher prices and throttle innovation.
The Way Ahead
Notwithstanding the latest snag to hit the, Halliburton and Baker Hughes maintained that talks with the DOJ will continue with both companies determined to complete the transaction as early as possible in 2016. They claim that their divestiture package is more than sufficient to cover all concerns raised by the authorities. What’s more, the Texas-based entities – who assist integrated behemoths like Exxon Mobil Corp. XOM in setting up oil wells – believe that the combination will enable clients to enjoy the efficient, state-of-the-art and cheap services from a strong company amid low oil prices.
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