US regulator not satisfied with Halliburton-Baker Hughes merger plan

Halliburton, the US oil services group, would be forced to delay its planned $26 billion acquisition of rival Baker Hughes for a second time, after it failed to reach an agreement with US competition regulators.

The US Department of Justice told the two companies that the disposals they had offered to mitigate the deal's effect on competition were not adequate. However, it has not initiated any legal action to block the takeover.

Meanwhile, the two companies agreed a final deadline of 30 April next year for closing the deal. They also plan to continue their discussions with the DoJ in an attempt to secure approval.

The delays forced by the DoJ come after moves by the US anti-trust official blocked several high-profile deals this year, over fears that consolidation among large companies could hurt interests of consumers and smaller businesses.

Halliburton agreed to acquire Baker Huges, last November. The mostly-shares deal was valued at $38 billion at that time, but is now worth about $26 billion due to the 18 per cent fall in the buyer's shares over the period.

Meanwhile, antitrust officials in Europe, Australia and Brazil are also weighing how the merger of the world's No 2 and No 3 oil-services companies could affect the competitive landscape.

When it announced its intention to acquire Baker, Halliburton said it planned to divest assets with revenue of as much as $7.5 billion. Bloomberg reported earlier this month that General Electric Co was in discussions to buy the drill-bits and drilling-services divisions of Halliburton, and is exploring bids for other assets.

Shares of both companies fell on the news but recovered later.

Bloomberg reported Rob Mackenzie, an analyst at Iberia Bank in New Orleans, as saying in a phone interview that investors likely sold Baker Hughes shares initially, due to the justice department's stance. However, the notion that regulators would not stop the deal today, seemed to have weighed positively, Bloomberg added  

"No action is better than a move to block in court and no action still gives the parties an opportunity to talk about settlement," Bloomber quoted Jennifer Rie, an analyst at Bloomberg Intelligence, as saying.