Business

Halliburton faces $3.5B break-up fee after failed merger

Halliburton, blocked by federal regulators from buying rival oil services company Baker Hughes, is staring at another huge disappointment — a $3.5 billion break-up fee.

That figure amounts to the largest cash break-up fee in history — beating the previous champ, the $3 billion in cash plus $1 billion in spectrum paid by AT&T when it was blocked from buying T-Mobile in 2011, according to Dealogic.

On Wednesday, the Department of Justice filed a suit to stop the $35 billion merger.

“The proposed deal between Halliburton and Baker Hughes would eliminate vital competition, skew energy markets and harm American consumers,” said US Attorney General Loretta Lynch.

Halliburton and Baker Hughes, in a joint statement, said they intend to “vigorously contest” the lawsuit.

But the companies, in the same statement, said they “may terminate the merger agreement” if the review extends beyond the April 30 date when Baker Hughes can contractually exit the deal and pocket the cash — something insiders believe will happen.

A federal trial would likely not begin until August, sources said.

What’s more, if the European Commission, which is reviewing the merger, moves to block the deal, it could force a two-year delay.

“Fighting a war on multiple fronts is a bridge too far,” said a source following the case. “I don’t know how they can fight this.”

If Halliburton is forced to pay the record break-up fee, it would mark a major misstep by its lawyers.

After failing to buy Baker Hughes in 2014 via a hostile bid, Halliburton reached a merger deal sweetened with a 10 percent break-up fee.

The normal fee is close to 3 percent.