WASHINGTON (Reuters) - Halliburton Co will have a tough time convincing U.S. regulators to approve its $35 billion deal to buy smaller rival Baker Hughes Inc but could prevail with the right divestitures, antitrust experts said Monday.
The deal, if approved, would create an oil services behemoth that would overtake current No. 1 Schlumberger NV.
Halliburton and Baker Hughes, which have already reached out to the U.S. Department of Justice, will argue that the government should analyze the companies by business segment and identify overlaps, according to a person familiar with the deal.
If the merged company was found to have too much power in one area, assets could be sold to competitors to ensure no monopolies are created.
Halliburton has said it was ready to divest businesses that generate revenue of $7.5 billion. It also agreed to pay Baker Hughes $3.5 billion if the deal did not clear.
But the Justice Department could instead consider that customers that want to contract a range of oil services to a single company would only have two main choices, Schlumberger and the new merged company, if the deal were to go forward.
This option is increasingly attractive to oil companies after the 2010 oil spill in the Gulf of Mexico because they want to be able to hold one company responsible in an accident, said two antitrust experts who know the industry.
“Many countries, national oil companies and majors want one throat to choke (if there is a spill), especially after the Gulf,” said one of the experts.
Still, the Justice Department could conclude that the oil companies who do business with Schlumberger, Halliburton and Baker Hughes are big and sophisticated enough that they don’t need government protection, said Andre Barlow, a veteran of the Justice Department now with Doyle, Barlow and Mazard PLLC.
“In the past, the DOJ has considered buyer power and the sophistication of the buyers with regards to this particular industry,” said Barlow, who expected the deal to be approved with significant divestitures.
Diana Moss of the American Antitrust Institute said that there were few companies providing comprehensive oil services. “I would hope that they (the government) would be aggressive in seeking to block it,” she said.
Reporting by Diane Bartz, editing by Ros Krasny and Cynthia Osterman