WASHINGTON (CN) – The Justice Department has reached an agreement on the merger of General Electric’s oil and gas division with the oil field services company Baker Hughes, clearing the way for shareholders to approve the deal.
The consent decree, filed on Monday in Washington DC, requires GE to sell its water and process technologies business. No other requirements were included in the decree.
It still must be approved by the court.
General Electric has agreed to sell the assets to French water company Suez for $3.4 billion, according to the consent decree and a GE press release.
“Today’s milestone represents significant progress toward creating an oil and gas productivity leader positioned to deliver value for customers, employees and shareholders,” General Electric said in a statement.
The Justice Department raised concerns in an eight-page complaint that the merger between Baker Hughes and General Electric would effectively kill competition in the oil and gas refinery field, “leading to higher prices, reduced service quality and diminished innovation.”
“The transaction would eliminate the competition between defendants to provide refinery process chemicals and service in the United States,” the complaint states. “After the transaction GE would gain the incentive and ability to raise its bid prices significantly above competitive levels, reduce its investment in research and development and provide lower levels of service.”
Together, General Electric and Baker Hughes rake in $32 billion in revenue and are two of only four companies that fill the need of producing chemicals and providing services necessary for companies to refine oil and natural gas, according to a Justice Department press release.
The Justice Department said the consent decree would ease the concerns about bringing together the two industry giants, though it still must be approved by the court to go into effect.
“Competition to provide refinery chemicals and services benefits a vital sector of our economy,” Acting Assistant Attorney general Andrew Finch said in a statement. “Today’s action will ensure that oil and gas refiners continue to receive competitive prices for the chemicals and services needed to produce oil, gasoline and other refined petroleum and natural gas products.”
The consent decree will be published in the federal register, as required in the Tunney Act, and will be subject to a 60-day period when people may comment on the agreement. At the end of that window the court will enter a final judgment, according to a DOJ press release.