Shares of Halliburton Company HAL gained more than 5 percent Wednesday, while Baker Hughes Incorporated BHI gained more than 6 percent after the U.S. Justice Department announced it will sue to block the merger between the two companies.
The Department of Justice alleges the proposed merger threatens to eliminate competition, raise prices and reduce innovation within the oilfield services industry. The governmental agency added the combination of two of the three largest oilfield services companies would also eliminate competition in markets for 23 products or services used for on- and off-shore oil exploration and production.
Halliburton attempted to appease regulators by divesting a mix of assets. However, the Department of Justice argues that Halliburton's proposals implies it will retain "more valuable assets" and sell "less significant" assets to potential buyers. As such, the proposed divestment "would not replicate the substantial competition between the two rivals that exists today."
"The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers," said Attorney General Loretta E. Lynch. "Our action makes clear that the Justice Department is committed to vigorously enforcing our antitrust laws. In the days ahead, we will continue to stand up for fair deals and free markets, and for the American people we are privileged to serve."
"This transaction is unprecedented in the breadth and scope of competitive overlaps and antitrust issues it presents," said Assistant Attorney General Bill Baer of the department's Antitrust Division. "Halliburton and Baker Hughes are two of the three largest integrated oilfield service companies across the globe, and they compete to invent and sell products and services that are critical to energy exploration and production. We need to maintain meaningful competition in this important sector of our economy."
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