Halliburton-Baker Hughes Deal Collapses


The Plunging Oil prices has had many victims. Not only the lower energy costs have impacted the Oil exporting economics of Middle East and Russia, It has only impacted the Multi national Corporations dealing with Oil Exploration. Another aspect of the industry which we do not get to hear much about is the equipment sector companies manufacturing rigs and drills for exploration in this mix of things is the story of Halliburton and Baker Hughes. The No 2 and No 3 in the world in terms of equipment had decided to go ahead with a merger in which Halliburton announced that it will Baker Hughes takeover in November 2014 in a bid to better compete against industry leader Schlumberger Ltd.

But in the past 1 year there has been tussle for regulatory approval turned which turned into a war of attrition, and to make things worse the shares of Halliburton and Baker Hughes declined amid the worst oil slump in a generation, reducing the deal’s value from $34.6 billion when it was announced to $28 billion. If even that was not enough the deal was called off today amidst uproar around the world that this deal will lead to reduction in competition and will cause a rise in energy price. The fact of the matter that even though both these companies have head quarters in USA but that their scale of operations impacts the world as a whole they need to take permissions from not only USA but also European Union and Australia.

The EU had its reservation on the fact that that only Schlumberger Ltd. would rival the merged company in offering integrated services and any new supplier would need to expand on a large number of fronts to compete on tenders. For Australia this merger would shrink the number of suppliers for oilfield goods and services, particularly offshore drilling. It said the proposed acquisition “may create conditions that would facilitate coordinated behavior” in the oil-services markets. Even Brazil was vocal that it would impact the state owned exploration giant Petrobras Business. And the most vocal opponent of this was the home country USA which stated that this merger would lead to creation of a Duopoly and harm the competition.

Thus as things stand the Halliburton Co.’s “unfixable” plan to merge with Baker Hughes Inc. has finally collapsed under the weight of worldwide antitrust opposition.