The pending $35 billion merger between Halliburton and Baker Hughes may hit yet another regulatory hurdle as the U.S. Department of Justice reportedly prepares to block the deal.

A source told Reuters on Tuesday that the agency will file a lawsuit to block the proposed merger as soon as this week.

Neither company has commented on the matter.

If the companies can not close the proposed merger Halliburton will have to pay Baker Hughes a $3.5 billion fee.

The DOJ allowed the deal’s timing agreement to expire in December without a settlement and without filing a lawsuit to block the deal.

The agency said it was concerned that a proposed divestment plan did not sufficiently address anti-trust issues.

The deal has also faced setbacks in Europe after the European Commission halted its review process as it sought more information.

The European Commission now expects to reach a final decision on the combination by July 11.

Houston-based Halliburton agreed to acquire Baker Hughes for $34.6 billion in cash and stock in November 2014.

The merger was initially expected to close in the second half of 2015.

The deal has already received unconditional regulatory clearances in Canada, Kazakhstan, South Africa and Turkey.

The DOJ’s Antitrust Division filed suit against ValueAct Capital on Monday for alleged conflicts tied to the firm’s holdings in Baker Hughes and Halliburton.

The DOJ said in a statement that ValueAct allegedly purchased over $2.5 billion of Halliburton and Baker Hughes voting shares without complying with the Hart-Scott-Rodino Act’s notification requirements.

According to the complaint, ValueAct purchased the shares after learning of the proposed merger “with the intent to influence the companies’ business decisions” as the deal unfolded, making the purchases ineligible for the “investment-only” exemption to HSR notification requirements.

The maximum civil penalty for a HSR violation is $16,000 per day.


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