Halliburton's messy battle to acquire British firm Expro via a hostile takeover has been big news in the global business press, with Halliburton up one day and down the next, but fighting on and on. Now, though, the story isn't just big news in the business press. It's big news too in the FCPA press (whatever that is). So what's going on?
Halliburton is the Requestor in the Justice Department's latest Foreign Corrupt Practices Act Opinion Procedure Release No.: 08-02 (June 13, 2008). It's trying to acquire all the shares of the Target, which isn't identified in the Release but is Expro International Group PLC, a U.K.-based company traded on the London Stock Exchange. Expro -- with about 4,000 employees throughout the world -- provides well-flow management for the oil and gas industry.
Competition for Expro comes from a group of foreign investors. In the Release they're called the Competitor but in real life they're known more picturesquely as Umbrellastream.
Halliburton's problem is that it can't do much due diligence because of "U.K. legal restrictions inherent in the bidding process for a public U.K. company." So for FCPA compliance, it's buying a black box. And that's why it's asking the DOJ what will happen if Expro has been paying bribes to foreign officials to obtain business.
Will Halliburton be held responsible for Expro's past FCPA offenses, if there are any, or for violations after the acquisition but before Halliburton has a chance to clean up any compliance problems? Halliburton is worried -- as it should be.
Like most oil and gas services firms, Expro operates in high-risk countries and deals directly with government-owned customers. Halliburton may already have seen evidence of non-compliance but can't say anything now because it signed a non-disclosure agreement with Expro. (In a footnote, the DOJ warns would-be requestors not to limit their ability to put all the facts in an Opinion Request by signing non-disclosure agreements. But it lets Halliburton get away with it this time.)
While Halliburton would like to condition its bid on successful FCPA and anti-corruption due diligence and pre-closing remediation, it can't do that. Umbrellastream's bid is unconditional and unless Halliburton's is the same, it will automatically lose.
The DOJ says it's OK to proceed. But to get the green light, Halliburton has promised to pay a very high price. And that "price" is what makes Release 08-02 unique among all Releases.
If Halliburton wins Expro, it must meet with the DOJ right away and disclose information it has that "suggests that any FCPA, corruption, or related internal controls or accounting issues exist or existed at the Target." That's the kick-off.
Ten days later it will give the DOJ . . .
. . . a comprehensive, risk-based FCPA and anti-corruption due diligence work plan which will address, among other things, the use of agents and other third parties; commercial dealings with state-owned customers; any joint venture, teaming or consortium arrangements; customs and immigration matters; tax matters; and any government licenses and permits. Such work plan will organize the due diligence effort into high risk, medium risk, and lowest risk elements.Then there are milestones at 90, 120 and 180 days, by when Halliburton must have finished the three "risk" phases of due diligence, all the while providing periodic reports to the DOJ.
Meanwhile Halliburton will impose on Expro its Code of Business Conduct and specific FCPA and anti-corruption policies and procedures; it will give all employees compliance training; fire agents and suppliers who aren't being retained; and require agents and others being retained to sign new contracts that include FCPA and anti-corruption representations and warranties.
In another feature new to Opinion Procedure Releases, Halliburton represents that after the closing it won't divest any of Expro if the DOJ is investigating Expro or "any of its officers, directors, employees, agents, subsidiaries, and affiliates." And no matter what, Expro and all its subsidiaries and affiliates will "retain their liability for past and future violations of the FCPA, if any."
That's not an express waiver of any and all available defenses, but it's close. And anyway, Halliburton will already have given the DOJ all the evidence of Expro's FCPA violations, which the DOJ would then be able to use to charge Expro, along with its aforesaid "officers, directors, employees, agents, subsidiaries, and affiliates."
No wonder the DOJ says that giving Halliburton the go-ahead to buy Expro (and expose everyone there to criminal enforcement action after the closing) "advances the interests of the Department in enforcing the FCPA . . . ."
People from Expro reading Release 08-02 must be seriously cheesed off. Is Halliburton promising to deliver their heads to the DOJ on a platter if they've ever done anything that would or could violate the FCPA? Well . . . . So will it surprise anyone if Expro's leaders aren't overjoyed by Halliburton's bid?
View DOJ Opinion Procedure Release 08-02 here.
By Michael Kavanagh and Megan Murphy in London
Published: June 23 2008 20:32 | Last updated: June 23 2008 22:41
Halliburton locked horns with the Takeover Panel on Monday over its failed attempt to kick-start an auction for Expro International, as the High Court postponed its approval of the sale of the British oil services company to a rival bidder.
During a dramatic hearing in London, Halliburton and Mason Capital, a US hedge fund that holds a 7.1 per cent stake in Expro, won a two-day delay on efforts to gain a court sanction on the sale of the UK company to the Candover-led consortium Umbrellastream for £1.8bn. . . .
The High Court’s decision to postpone the hearing is the latest twist in a fiercely contested takeover battle. . . .
Expro says that Halliburton’s bid, while 10p higher, was inadequate given the delays and risks associated with that deal. . . .