Officials said allowing the Halliburton Co. and Baker Hughes Inc. — second- and third-largest in the industry — to combine would stifle competition and lead to higher prices.
The government said the $35 billion merger would leave the combined company and Schlumberger NV as the only two dominant companies in the sector, according to the Reuters news service.
But Halliburton promised to “vigorously contest” the government lawsuit, even though it has seriously lessened the chance of the merger ever being approved.
“The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers,” U.S. Attorney General Loretta Lynch said Wednesday.
“Our action makes clear that the Justice Department is committed to vigorously enforcing our antitrust laws,” she said.
U.S. officials said Halliburton had offered to divest some of its holdings in an effort to save the deal but these were inadequate.
“I have seen a lot of problematic mergers in my time,” said Bill Baer, head of the justice department’s antitrust division.
” But I have never seen one that poses so many antitrust problems in so many markets,” he said.
But Halliburton disagreed with Baer’s characterization of the proposed merger.
“The companies believe that the DOJ has reached the wrong conclusion in its assessment of the transaction and that its action is counterproductive, especially in the context of the challenges the U.S. and global energy industry are currently experiencing,” the company said.
Halliburton was the company headed by Dick Cheney before he become vice president of the United States from 2000 to 2008.
The proposed merger also has raised concerns for European Union antitrust regulators, who have repeatedly asked for more information from the companies.
Halliburton shares were up 6.9 percent on Wednesday at $36.76 while Baker Hughes shares were up 8 percent at $42.65.
If the deal falls apart over antitrust concerns, Halliburton would be required to pay $3.5 billion to Baker Hughes as a breakup fee, Reuters said.
The U.S. government’s lawsuit was filed in federal court in Delaware, where both companies are incorporated.
