Halliburton, Baker Hughes Merger Off

Source: USA Today

Oilfield services giants Halliburton and Baker Hughes have nixed their merger following opposition from the Obama administration, according to multiple reports.

The Houston-based energy companies last month pledged to "vigorously contest" the U.S. Justice Department's lawsuit against Halliburton's acquisition of Baker Hughes, but the obstacles appeared too significant to surmount, according to reports by Bloomberg and the Wall Street Journal.

The demise of a deal previously valued at $34 billion was generally anticipated on Wall Street, where investors had expected government opposition to the tie-up of two of the three largest U.S. oilfield services companies.

Halliburton would owe Baker Hughes a $3.5 billion breakup fee if the deal falls apart, according to Deutsche Bank.

Though the companies had pledged to sell assets to assuage monopoly concerns, U.S. antitrust division chief Bill Baer delivered a blistering rebuke of the deal, telling reporters in April that the deal posed a "serious" threat to competition and "wasn't fixable."

The Justice Department filed a lawsuit to block the deal in April, about a year and a half after it was first unveiled. The move was seen as an indicator of the Obama administration's increasingly active role in blocking big mergers.

"I have never seen one that poses so many antitrust problems in so many markets," Baer, an assistant attorney general, said at the time. "Our lawsuit should surprise no one."

The demise of the merger could not be independently confirmed Sunday night.

A Baker Hughes representative declined to comment, and a Halliburton representative did not respond to a request. A Justice Department spokesman declined to comment.

After Halliburton on April 22 delayed its first-quarter earnings call until May 3, speculation centered on the likelihood that the deal was dead.

Both companies are reeling from the crushing force of rock-bottom oil prices that have undermined their key customers, exploration and production companies.

Halliburton estimated last month that North American spending on drilling and well completion would fall by 50% in 2016, worse than 2015's 40% drop. Halliburton's first-quarter revenue fell 17% to $4.2 billion, compared with the same period a year earlier.

Still, both companies remain a good bet despite the merger's likely demise, Deutsche Bank analyst Mike Urban said Thursday in a research note.

With combined 2015 revenue of $39.3 billion, Halliburton and Baker Hughes control a nearly 16% market share in the oilfield services field, according to data provider IBISWorld. They provide a wide range of services such as oil-well completions, cementing and drilling.

Halliburton and Baker Hughes had called their deal "pro-competitive" after it came under attack from the Justice Department, noting that Halliburton had offered to sell off billions of dollar in assets. But the Justice Department said Halliburton's proposed divestitures were insufficient and would not foster increased competition.