[Updated] Halliburton, Baker Hughes End Deal
Halliburton and Baker Hughes have announced the termination of their merger agreement following opposition from U.S. and European antitrust regulators.
The deal would have brought together the world's No. 2 and No. 3 oil services companies, raising concerns it could result in higher prices in the sector. It is the latest example of a large merger deal failing to make it to the finish line because of antitrust hurdles.
“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 Officer of Halliburton.
The contract governing Halliburton's cash-and-stock acquisition of Baker Hughes, which was valued at $34.6 billion when it was announced in November 2014, and is now worth about $28 billion, expired on Saturday without an agreement by the companies to extend it.
In connection with the termination of the merger agreement, Halliburton will pay Baker Hughes the termination fee of $3.5 billion by May 4, 2016.
The U.S. Justice Department filed a lawsuit to stop the deal last month, arguing it would leave only two dominant suppliers in 20 business lines in the global well drilling and oil construction services industry, with Schlumberger being the other.
The European Commission also previously expressed concerns that the deal may reduce competition and innovation.
The Justice Department and Federal Trade Commission, which enforce U.S. antitrust law, have filed lawsuits to stop an unusually high number of deals in the past 18 months. Attorney General Loretta Lynch said last month that the number of big and complex deals being proposed made it "a unique moment in antitrust enforcement."
The collapse of Halliburton's acquisition of Baker Hughes comes as both companies struggle to cope with the impact that lower energy prices are having on their clients.
Last week, Baker Hughes reported a bigger-than-expected first-quarter loss and warned that the rig count globally would drop steadily through the end of the year because of fewer new projects.
Halliburton said last month it cut more than 6,000 jobs in the first quarter, during which revenue slumped 40.4 percent, and it took a $2.1 billion restructuring charge mainly for severance costs and asset write-offs.