Halliburton-Baker Hughes Merger Scrapped Amid Regulatory Concerns
The $28B merger to bring together the world's No. 2 and No. 3 oilfield service providers has been scrapped due to regulatory concerns. Last month, the US Justice Department filed a lawsuit to stop the merger, arguing it leave only two suppliers across 20 business lines in the global well drilling and oil construction industry, with Schlumberger being the other.
Without a deal, things are about to get ugly as both companies scramble to stop the bleeding. Halliburton was holding onto support staff like the lawyers and accountants it would've needed to manage a larger business. Baker Hughes kept business larger than it would've liked, estimating it carried an extra $110M in Q1 cost to comply with the deal. Experts now expect both companies to make deep cuts. On the other hand, such large mergers typically come with the consolidation of office space, so the news may be a bit of a relief for the commercial real estate industry.
As a result of the deal falling apart, Halliburton will pay Baker Hughes a $3.5B break up fee. Halliburton should have no trouble covering the bill—the company borrowed $7.5B to help finance the acquisition.