By Robert Grattan of the Houston Chronicle
(April 11) – Halliburton Co. is potentially on the hook to pay one of the largest breakup fees in U.S. corporate history now that regulators have sued to block its deal to buy Baker Hughes.
The $3.5 billion breakup fee it agreed to pay if its deal is scuttled would be the largest antitrust fee paid since the Justice Department quashed AT&T’s bid to buy T-Mobile USA in 2011 and triggered a $4 billion charge.
And it vastly exceeds the averages.
It represents nearly 13 percent of the deal’s $26.6 billion present value. By contrast, the average antitrust fee was 5.5 percent and the median was 4.3 percent in an analysis of 104 similar deals over the past decade, according to New York City-based law firm Shearman & Sterling LLP’s.
Jeff Floyd of Vinson & Elkins tells the Houston Chronicle that ironically, some of the extra scrutiny the deal received was possibly triggered by the large breakup fee that Hallburton disclosed when it announced the merger in November 2014.
“These things are a two-edge sword when you’re negotiating them, Floyd tells the Chron. “You’ve sort of highlighted an acknowledged that there’s a real regulatory risk.”
But should Halliburton and Baker Hughes’ fight with the DOJ become unsuccessful and the deal officially falls apart, the breakup fee payment might be litigated or reduced through negotiation, Orrin Harrison of Gruber Elrod Johansen Hail Shank tells the Chron.
“These agreements have all kinds of outs in them,” he said.
Read the Houston Chronicle’s full report here.