On Wednesday, the Justice Department has sued to block the planned merging of two oilfield services firm, saying it may enrich the companies but hurt the consumers in the process.
According to Mercury News, Justice Department sued to stop the Halliburton Co. from acquiring the oilfield services rival Baker Hughes Inc. The department is keen on stopping the acquisition as it may benefit the corporations but harm consumers.
The proposed transaction was valued at $35 billion and would combine the world's two of the top three leading providers of oil services. The combined efforts of the two companies would mean a threat to the industry leader, Schlumberger Ltd. Notably, it was in 2014 that both companies announced their plans to combine just after the oil prices began to drop.
ABC News wrote that the Justice Department argues that the deal would eliminate head-to-head competition in 23 markets for products and services including drill bills, fluids and expertise in drilling horizontal wells. To retaliate, Halliburton already said they are contesting the lawsuit and Baker Hughes said the same. They added that the Justice Department is wrong to its view regarding the deal since it's known that the oil industry is experiencing downfall. In a joint statement, they said that the deal would improve the competition by creating a more flexible, innovative services company.
Nonetheless, Yahoo reported that Assistant Attorney General Bill Baer said the oilfield services is a cyclical business and that its companies grow and shrink with market conditions. In a statement he said, "It's not a justification for an anticompetitive merger to say, 'We're not doing as much business as we used to."
Analysts predict that even without the deal, Halliburton would still be stable to get profit from recovery in the North America energy business. However, they didn't say the same for Baker Hughes. Bill Herbert, an analyst from Simmons & Co said "Baker Hughes has great technology, but there has always been this mystifying imbalance between the technology platform and their operational results."
