HAL.WD Halliburton

   (FROM THE WALL STREET JOURNAL 12/11/15) 
   By Alison Sider and Brent Kendall 

More than a year after it was announced, Halliburton Co.'s $35 billion deal to buy Baker Hughes Inc. is facing a growing list of antitrust concerns from the U.S. Justice Department and other competition authorities world-wide that could threaten the combination.

Meanwhile, plunging oil prices have reduced demand for drilling, complicating the oilfield-service giants' efforts to find buyers for assets they would need to sell for the deal to pass regulatory muster, executives and experts say.

The Justice Department, which is concerned the tie-up would suppress competition, is questioning whether other companies could buy some of these assets and become credible rivals to the combined company, according to people familiar with the matter.

Halliburton recently met with the department's top antitrust official, Bill Baer, to talk about the deal, some people familiar with the deliberations said, a sign the review process has reached a critical stage.

A Justice Department spokesman declined to comment.

Halliburton and Baker Hughes, which do the physical work of drilling wells and extracting oil and natural gas for energy companies, trail only Schlumberger Ltd. in the marketplace.

"Everything about this deal has turned out to be more complicated and, frankly, more challenging than what was initially envisioned," said William Herbert, co-head of securities at Simmons & Co. International, an energy-focused investment bank in Houston.

Across the Atlantic, Halliburton recently resubmitted its merger filing to the European Commission, which had decided that important information for assessing the transaction was missing from a filing this summer. The commission has set a Jan. 12 deadline for clearing the merger or starting an in-depth investigation.

The merger is also receiving continued antitrust scrutiny in other countries including Australia, Brazil and China.

Antitrust authorities in Brazil and Australia have voiced concerns about the sheer size of the deal for customers seeking a package of integrated services from large firms like Halliburton and Baker Hughes. Halliburton said it is working with regulators around the world.

Christian Garcia, Halliburton's interim chief financial officer, said Wednesday the company was confident the deal would close, but conceded that the goal of wrapping it up in 2015 was all but dead. He said the company is having "substantive discussions" with the Justice Department as a Dec. 15 deadline looms.

The department isn't necessarily obligated to make a decision by that date, because antitrust issues in other international jurisdictions won't be resolved by then. The two sides have the option to reach a new timing agreement.

Halliburton has argued that the merger will provide better value for its customers, and that competition in the oil patch is already intense, with low oil prices pushing every company to slash prices.

Analysts expect Halliburton will go to great lengths to see the deal through, even if it means selling off a lot of its product lines at discounted prices.

Halliburton will have to pay $3.5 billion to Baker Hughes if antitrust enforcers block their combination, but Baker Hughes also has reason to remain committed to the deal's success. It would likely emerge from a failed sales process even weaker than it was before.

Baker Hughes declined to comment.

The price of crude oil had already started to slidefrom its June 2014 peak when the companies agreed to the tie-up in November that year. Since then, oil-company clients have slashed their spending plans, forcing oil-field service companies to do the same. Halliburton and Baker Hughes have laid off nearly 35,000 employees between them, or more than 20% of their respective workforces.

So far the companies have announced plans tosell overlapping product linesthat generated $5.2 billion in revenue, and are considering whether they will need to cast off more,according to people familiar with the matter.They agreed last year to sell as much as $7.5 billion worth of business if required by regulators.

General Electric Co., which has expanded its oil-and-gas segment in recent years, has signaled an interest in expanding and is an active participant in the divestiture process, but no deal is imminent, according to people familiar with the matter.

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Ted Mann and Dana Mattioli contributed to this article.

(END) Dow Jones Newswires

December 11, 2015 02:48 ET (07:48 GMT)

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