DOJ Says Hedge Fund Violated Anti-Trust Rules in Halliburton Merger Trade

The company logo of Halliburton oilfield services corporate offices is seen in Houston
The company logo of Halliburton oilfield services corporate offices is seen in Houston, Texas April 6, 2012. REUTERS/Richard Carson (UNITED STATES - Tags: BUSINESS LOGO ENERGY) - RTR30FPE
Photograph by Richard Carson — Reuters

The Department of Justice said on Monday it had sued activist investorValueAct Capital for violating pre-merger notification requirements related to oilfield service provider Halliburton (HAL) deal to buy rival Baker Hughes (BHI).

The lawsuit said ValueAct used its access to senior Halliburton and Baker Hughes executives to formulate the merger and other strategies, and also said a civil penalty of “at least $19 million” was appropriate.

The Department of Justice (DOJ) said in its lawsuit that ValueAct violated pre-merger notification requirements, as outlined in the Hart Scott Rodino Act, which provides the Federal Trade Commission and the Department of Justice with information about large mergers and acquisitions before they occur.

Halliburton is awaiting regulatory approval for the acquisition, which was worth $35 billion when it was announced in November 2014. The value of the deal has since fallen by nearly half, hit by the plunge in oil prices.

ValueAct said in a statement it will fight the allegations.

“We fundamentally disagree with the Department of Justice’s allegations in this case,” the San Francisco-based hedge fund said in an emailed statement.

ValueAct said having a relationship with a company’s management, conducting due diligence and engaging with other stock owners are basic principles of shareholder rights.

In November 2014, Halliburton announced it would buy oil and gas services rival Baker Hughes in a cash and stock deal worth $34.6 billion at the time. The deal was supposed to close in the second half of last year but has been hit with anti-trust delays.

ValueAct, a shareholder in Halliburton since 2012, disclosed last January that it bought a stake in Baker Hughes, saying at the time that its belief in the deal was underpinned by the drop in oil prices.

The two holdings together comprise nearly 10% of ValueAct‘s total portfolio, as of Dec. 31 of last year, and lost a combined $656 million in paper value during 2015, Reuters previously reported. ValueAct is also one of the biggest outside investors in troubled drug company Valeant (VRX), shares of which have plunged over 80% from their high.

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