Halliburton

Halliburton: ValueAct Really Is The Mullet

The proposed merger between Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) has received a lot of scrutiny over the past several months. Now the DOJ has added ValueAct Capital to the soap opera, suing the hedge fund for an antitrust violation:

The lawsuit centers on a 40-year old U.S. law that exempts investors who buy up to 10 percent of a company's voting securities from disclosing purchases made only for passive investment purposes.

The Department of Justice alleges that ValueAct was an active investor from the time it started to build its position in both companies shortly after the November 2014 merger agreement, and that the hedge fund violated the law - known as the Hart-Scott-Rodino (HSR) Act - by waiting too long to disclose its intentions ...

The lawsuit said ValueAct used its access to senior Halliburton and Baker Hughes executives to formulate the merger and other strategies. The government is seeking a civil penalty of at least $19 million - a penalty it deemed "significant."

This has to be the oddest antitrust lawsuits I have ever seen. I have been pessimistic on the merger, and predicted that both BHI and HAL would plummet once the deal was not approved. In October I questioned whether ValueAct was providing mullet money, or "dumb money" with its investment in BHI. Even I could not have foreseen that the hedge fund would have failed to disclose major stakes in both companies, as the DOJ has claimed.