Australian regulator flags concerns over Halliburton's $35-bn Baker Hughes merger

US oil services giant Halliburton Co's proposed acquisition of rival Baker Hughes Inc has run into trouble after the Australian regulator raised concerns on the $35-billion deal.

The Australian Competition and Consumer Commission (ACCC) after having delayed its final ruling for a third time, said that the merger of the world's second and third-largest oilfield services firms, "may create conditions that would facilitate coordinated behavior in the market".

"The ACCC is concerned that the acquisition would result in the merged entity being one of only a small number of suppliers that could service the relevant markets," ACCC chairman Rod Sims said in a statement, and added that the companies are "close competitors across a broad range of oilfield goods and services in Australia".

"The ACCC is particularly concerned in relation to the supply of complex or high-risk projects, such as off-shore drilling projects," Sims added.

ACCC said that it will give a final ruling on 17 December.

US regulators have already raised concerns on the deal about possible higher prices and reduced innovation, while the European Union competition commission  has suspended its review on the deal because the companies have failed to provide sufficient data.

Halliburton said in November 2014 that it would acquire Baker Hughes In a friendly deal  for about $34.6 billion, that would create a merged entity worth $67 billion. (See: Halliburton to acquire rival Baker Hughes for $34.6 bn)

The takeover faces regulatory scrutiny, as a tie up between the No 2 and No 3 oil services giants would attract antitrust concerns in the US, Europe, Brazil, Australia and China.

Both are giants in the oilfield services providing services with expertise ranging from drilling wells, hydraulic fracturing / fracking, production and reservoir consulting, formation evaluation to pressure pumping.

The merger between the two Houston-based companies could challenge market leader Schlumberger and end competition between the two decades-old rivals in the oil field service business.

A merged company would have around 54 per cent market share while Schlumberger has 14 per cent.

Halliburton, founded in 1919, has emerged as one of the leading suppliers of equipment for hydraulic fracturing, better known as fracking - the drilling technique underpinning the American energy boom.

Over the years, Halliburton had been involved in several prominent events in the industry, including the 2010 Deepwater Horizon oil rig explosion, in which it pleaded guilty to destroying evidence and agreed to pay a large settlement.

In order to gain regulatory approvals, both companies are planning to divest businesses that had 2013 revenues of $5.2 billion.

The businesses to sell include Halliburton's expandable liner hangers business; Baker Hughes's packers, flow control tools and subsurface safety systems; Baker Hughes's sand control business in the Gulf of Mexico; and its offshore cementing businesses in Australia, Brazil, the Gulf of Mexico.

Halliburton plans to divest its fixed cutter and roller cone drill bits, directional drilling and its logging while drilling and measurement while drilling businesses.