Amid pressure from both U.S. and European antitrust regulators, two of the world's biggest oilfield services companies, Halliburton and Baker Hughes, have called off their $28 billion merger.
In April, the Justice Department sued to stop the merger saying it would have eliminated competition, NPR's Jim Zarroli reports for our Newscast unit.
The companies perform various services in the oil production process, including managing geological data, drilling evaluation, well construction, as well as transporting and processing the oil, according to the companies' websites. The DOJ said the deal would have left just two dominant entities in this business: the newly formed company, and Schlumberger, which is the world's largest oil services company.
As the Two-Way reported in 2014, the Halliburton-Baker Hughes deal was initially valued at $34.6 billion, and the combined company's revenue would have been "slightly more than that generated by Schlumberger."
U.S. Attorney General Loretta E. Lynch praised the decision to back away from the deal.
"The companies' decision to abandon this transaction — which would have left many oilfield service markets in the hands of a duopoly — is a victory for the U.S. economy and for all Americans," she said in a statement.
Deputy Assistant Attorney General David Gelfand of the Justice Department's Antitrust Division said in the statement that the merger would have "raised prices, decreased output and lessened innovation in at least 23 oilfield products and services critical to the nation's energy supply."
In a joint statement, executives from Halliburton, which is the second-largest oilfield services company, and Baker Hughes explained the decision.
"Today's outcome is disappointing because of our strong belief in the vast potential of the business combination to deliver benefits for shareholders, customers and both companies' employees," Baker Hughes CEO Martin Craighead said. "This was an extremely complex, global transaction and, ultimately, a solution could not be found to satisfy the antitrust concerns of regulators, both in the United States and abroad."
Halliburton CEO Dave Lesar echoed the sentiment, citing "challenges in obtaining remaining regulatory approvals" and "general industry conditions" as the reason for the deal's termination.
As part of their agreement to end the merger, Halliburton will pay Baker Hughes a $3.5 billion termination fee, the companies' statement said.
The Associated Press reports that the deal was struck "shortly after oil prices began to fall" in 2014. But the news service says the sharp and prolonged drop in prices "slowed demand for drilling services and crushed the stock price of both companies."