Halliburton faces more scrutiny over Baker Hughes deal from Justice Department

The $34.6 billion mega-deal for Halliburton to acquire Baker Hughes is receiving additional scrutiny from the U.S. Justice Department and the European Commission, the companies confirmed Monday.

Just as Baker Hughes did last month, Halliburton said it has responded to a second round of antitrust questions from the Justice Department, without giving details about what was asked.

The European Commission is also seeking additional information from the companies “in a few discrete areas” after they submitted their merger notifications on July 23. Halliburton announced it will work closely with the commission to provide more details in the near future.

Governmental entities could have concerns about competition being reduced once the world’s second- and third-largest oil field services companies, both of which are Houston based, join forces.

Last month, Halliburton said it expects to close the deal no later than Dec. 1 after initially announcing a much broader closing in the second half of 2015. The Justice Department review process was extended until at least Nov. 25 and the companies said that such timing agreements are not rare when it comes to complex transactions.

The “labyrinthine and complex” transaction is still moving forward as planned, but only because bumps in the road were expected, said Bill Herbert, co-head of securities at energy investment bank Simmons & Company International.

Herbert said he has anticipated all along that the deal may not close until 2016.

“It was never going to be easy. I’m pretty confident this this will close because, at this stage, Halliburton’s management team has so much invested,” Herbert said.

In the meantime, Halliburton and Baker Hughes will work with both the U.S. and European regulatory bodies to mollify their anti-competitive concerns, he said, arguing that the European Commission could end up being the toughest path because there is a more competitive landscape in the U.S. oil field services market.

Halliburton has agreed to pay Baker Hughes $3.5 billion if the deal falls through, and is expecting to sell certain business units and assets — more than originally planned — either because they are redundant or to comply with federal regulators to get the deal approved. Halliburton’s drill bits business and its Sperry Drilling arm are among those expected to sell, Herbert said.

Halliburton and Baker Hughes both recently said in regulatory filings they have cut jobs deeper than they previously estimated they would, with Halliburton cutting 14,000 jobs and Baker Hughes laying off 13,000 since they began trimming their head counts. That is a combined 7,500 higher than estimates in April.

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