The United States Department of Justice (DOJ) filed a civil antitrust lawsuit against ValueAct Capital Management, the activist hedge fund headed by Jeffrey Ubben.
The lawsuit was connected to the hedge fund’s more $2.5 billion investment in Halliburton Company (NYSE:HAL) and Baker Hughes Incorporated (NYSE:BHI).
ValueAct violates HSR Act
According to the DOJ, ValueAct Capital failed to notify antitrust authorities regarding its investment in Halliburton and Bake Hughes and wrongly claimed that it had no intention to influence the business decisions of the companies.
In 2014, Halliburton and Baker Hughes reached a merger agreement valued at $35 billion. ValueAct acquired stakes with the intent to influence the business decision of both companies as the merger unfolded. The activist hedge fund could not rely on the limited “investment-only” exemption to HSR notification requirements, according to the DOJ.
The DOJ said certain Value Act Capital entities violated the reporting and waiting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). The agency filed the case against the activist hedge fund in the U.S. District Court for Norther District of California.
DOJ to seek significant civil penalties
The Antitrust Division of the DOJ is seeking civil penalties and an injunction against further violations of the HSR Act by the activist hedge fund.
Bill Baer, assistant attorney general of the DOJ’s Antitrust Division said ValeAct became one of the largest shareholders of the two competitors amid the antitrust review of the proposed merger.
He added that the activist hedge fund “used its position to influence decision-making at both companies” and it “was not entitled to avoid HSR requirements by claiming to be a passive investor.”
Furthermore, Baer said they will seek significant civil penalties against ValueAct given the seriousness of its violation and prior HSR violations.
According to the DOJ, federal courts can assess the civil penalties for premerger notification violations under the HSR Act in a lawsuit brought by the Antitrust Division. The maximum civil penalty for an HSR violation is $16,000 per day.
ValueAct manages more than $16 billion on behalf of investors. The activist hedge fund is focused on acquiring significant ownership stakes in a limited number of companies. It is known for working constructively with the Board and management of every company where it has investment to implement strategies that maximize returns for all shareholders.