Halliburton Co.’s proposed purchase of Baker Hughes Inc. faces further regulatory scrutiny after Australia’s competition watchdog raised concerns that the $34.6 billion deal would shrink the number of suppliers for oilfield goods and services, particularly for offshore drilling.
The Australian Competition & Consumer Commission delayed its decision until Dec. 17 and asked for further comments from market participants, according to a statement from the regulator on Friday. The businesses have significant competitive advantages in providing services as they benefit from extensive product ranges, economies of scale and scope as well as industry experience, the ACCC said.
Earlier this week it was revealed a decision on Shell’s takeover of BG Group by Australia’s competition watchdog has been postponed until the middle of November.
The move follows an earlier deferral last month by the Australian Competition and Consumer Commission (ACCC).
Halliburton and Baker Hughes last month flagged the sale of additional business units in an effort to satisfy antitrust concerns over the takeover. The world’s second- and third- largest oilfield service companies have been seeking to complete the deal by either Dec. 15, or 30 days after both certify compliance with US Justice Department requests, whichever is later.
“You can understand why the ACCC would have some issues,” Angus Nicholson, a market strategist at IG Ltd. in Melbourne, said by phone. “With oil prices so low at the moment, it’s possible putting these two companies together may push up the cost of oilfield services, which again is another matter that would be of concern to the ACCC.”
Halliburton proposed the takeover of Baker Hughes on Nov. 17. The two companies are looking to create a larger footprint with a broader technology portfolio to better compete against Schlumberger Ltd., which will still be about twice the size of the combined contractors.
“The ACCC is particularly concerned in relation to the supply of complex or high-risk projects, such as offshore drilling projects,” Chairman Rod Sims said in the statement. “The ACCC also considers that the proposed acquisition may create conditions that would facilitate coordinated behavior in the market.”
Baker Hughes is selling its offshore hydraulic fracturing business in the Gulf of Mexico, along with two vessels that carry the necessary gear to frack the wells and control the sand spilling from the oil-soaked reservoir under the seabed. It’s also divesting businesses in Australia, Brazil, Norway, and the U.K. that cement the offshore wells into place. Halliburton will market a portion of its well-completions business.
The ACCC is also conducting a detailed review of Royal Dutch Shell Plc’s planned $70 billion acquisition of BG Group Plc after it raised concerns in September that the transaction could reduce natural-gas supply to Australian customers and boost prices. The regulator is due to rule on the deal Nov. 12.