HAL Halliburton Co

By Tom Fairless 

BRUSSELS-- Halliburton Co. faces a fresh hurdle toward its $35 billion acquisition of rival Baker Hughes Inc. after European Union regulators opened a full-blown antitrust investigation into the deal, warning it raised "serious potential competition concerns."

The merger, which would unite the second and third largest oil-field services suppliers, already faces a growing list of antitrust concerns in the U.S., even as the slump in oil prices complicates the firms' efforts to find buyers for any assets that might need to be sold to assuage regulators.

The European Commission, the EU's top antitrust authority, said Tuesday it would open an in-depth probe into the merger after its initial inquiry revealed that the firms "seem to be close competitors, both in terms of tenders and in innovation."

The merger would eliminate one of only four large global firms in the sector, the regulator said, the other two being market leader Schlumberger Ltd. and a smaller competitor, Weatherford International Ltd.

Margrethe Vestager, the EU's antitrust chief, said her agency "has to look closely" at the deal to ensure that "it would not reduce choice or push up prices for oil and gas exploration and production services in the EU."

Such in-depth inquiries are common for large merger reviews in Brussels and don't necessarily mean a deal will be blocked. If the EU confirms its concerns, the companies also can decide to offer concessions, such as selling assets, to assuage the regulator. If those aren't deemed sufficient, Brussels also can block the deal.

Halliburton and Baker Hughes said the EU's decision was a "normal step" in its merger review process, and that they expected to offer up a "substantial remedies package" that they believe will address "any substantive competition concerns." They said the deal so far has received regulatory clearances in Canada, Colombia, Ecuador, Kazakhstan, South Africa and Turkey.

The EU has until May 26 to make a final decision.

The EU said its initial probe had indicated "serious potential competition concerns" in more than 30 product and service lines, both for offshore and onshore businesses. The two companies supply a range of tools and services for drilling and evaluation as well as completion and production of oil and gas wells.

The commission said it believes that only three companies are able to provide integrated services across many product and service lines in the oil-field-services sector, namely Halliburton, Baker Hughes and Schlumberger. The deal would therefore reduce the number of integrated service providers from three to two, "which may lead to less choice and potentially higher prices for customers," the regulator said.

Ms. Vestager said it was important to get the review right because ensuring efficient production of oil and gas was an important part of the EU's broader energy strategy "in terms of ensuring security of supply."

Write to Tom Fairless at tom.fairless@wsj.com

(END) Dow Jones Newswires

January 12, 2016 14:55 ET (19:55 GMT)

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