United States v. Baroid Corp., Baroid Drilling Fluids, Inc., DB Stratabit (USA) Inc., and Dresser Industries, Inc.; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Baroid Corp., Baroid Drilling Fluids, Inc., DB

Stratabit (USA) Inc., and Dresser Industries, Inc.; Proposed Final

Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. 16 (b)-(h), that a proposed Final Judgment and

Competitive Impact Statement have been filed with the United States

District Court for the District of Columbia in United States of America

v. Baroid Corporation; Baroid Drilling Fluids, Inc.; DB Stratabit (USA)

Inc.; and Dresser Industries Inc.

The Complaint of the United States in this case alleges that the

merger of Dresser Industries, Inc. (``Dresser'') and Baroid Corporation

(``Baroid'') may substantially lessen competition in the United States

in the manufacture and sale of drilling fluids and in the manufacture

and sale of diamond drill bits in violation of section 7 of the Clayton

Act. Both products are used to drill oil and gas wells. Drilling

fluids, a mixture of natural and synthetic chemical compounds, are used

at petrocarbon drilling sites to improve the function of the drill bit

and other drilling tools in the well, including cooling and lubricating

the drill bit and controlling downhole pressures. Diamond drill bits

cut through rock and other formations during drilling operations.

Dresser, through its 64% partnership interest in M-I Drilling

Fluids Co., and Baroid, through its wholly-owned subsidiary, Baroid

Drilling Fluids, Inc., are two of the three major U.S. producers of

drilling fluids. In addition, Dresser's Security Division and Baroid's

wholly-owned subsidiary, DB Stratabit (USA) Inc., manufacture diamond

drill bits for sale in the United States. They are two of the five

major competitors in the U.S. diamond drill bit market.

The proposed Final Judgment requires defendants to divest all of

their direct and indirect ownership and control of either Dresser's or

Baroid's drilling fluid business by June 1, 1994. In addition,

Defendants must, by July 1, 1994, divest Baroid's diamond bit business,

which includes a manufacturing facility, certain equipment, a

nonexclusive license of patents and other intellectual property to

manufacture and sell steel-bodied diamond drill bits worldwide, except

in the People's Republic of China, and a nonexclusive license to

manufacture and sell matrix diamond bits in the United States. If

defendants do not complete the respective divestitures by the allotted

time, a trustee or trustees will be appointed to conduct either or both

of the divestitures.

Public comment on the proposed Final Judgment is invited within the

statutory 60-day comment period. Such comments, and responses thereto,

will be published in the Federal Register and filed with the Court.

Comments should be directed to Roger W. Fones, Chief, Transportation,

Energy, and Agriculture Section, Antitrust Division, room 9104,

Judiciary Center Building, 555 4th Street NW., Washington, DC 20001

(202-307-6351).

Joseph H. Widmar,

Director of Operations, Antitrust Division.

Stipulation

Judge Sporkin

In the matter of United States of America, Plaintiff; v. Baroid

Corp., Baroid Drilling Fluids, Inc., DB Stratabit (USA) Inc., and

Dresser Industries, Inc., Defendants. [Civil Action No. 93-2621;

Filed: December 23, 1993.]

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties thereto, and venue of this action

is proper in the District of Columbia;

2. The parties consent that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. 16), and without further notice to any party or other

proceedings, provided that plaintiff has not withdrawn consent, which

it may do at any time before the entry of the proposed Final Judgment

by serving notice thereof on Defendants and by filing that notice with

the Court;

3. The parties shall abide by and comply with the provisions of the

Final Judgment pending its entry, and shall, from the date of the

filing of this Stipulation, comply with all the terms and provisions

thereof as though the same were in full force and effect as an order of

the Court;

4. In the event Plaintiff withdraws its consent or if the proposed

Final Judgment is not entered pursuant to this Stipulation, this

Stipulation shall be of no effect whatever, and the making of this

Stipulation shall be without prejudice to any party in this or any

other proceeding.

Dated: December 23, 1993.

For Plaintiff United States of America:

Anne K. Bingaman,

Assistant Attorney General.

Constance K. Robinson,

Deputy Director of Operations.

Roger W. Fones,

Chief, Transportation, Energy & Agriculture Section, U.S. Department of

Justice, Antitrust Division

Angela L. Hughes,

Denise L. Diaz,

Theodore R. Bolema,

Attorneys, U.S. Department of Justice, Antitrust Division, room 9104,

555 4th Street, NW., Washington, DC 20001, 202/307-6410.

For Defendant Dresser Industries, Inc.: Akin, Gump, Strauss,

Hauer, & Feld, L.L.P.

Paul B. Hewitt,

A Member of the Firm.

1333 New Hampshire Avenue, NW., Suite 100, Washington, DC 20036,

(202) 887-4000.

For Defendants Baroid Corporation, D8 Stratabit (USA) Inc., and

Baroid Drilling Fluids, Inc.: Kirkland & Ellis.

Tefft W. Smith,

A Member of the Firm.

200 E. Randolph Dr., Chicago, Illinois 60601, (312) 861-2000.

Stipulation Approved for Filing.

Done this ________ day of ________, 199____.

----------------------------------------------------------------------

United States District Judge.

Final Judgment

[Civil Action No. 93-2621; Filed: December 23, 1993]

Judge Sporkin

In the matter of United States of America, Plaintiff; v. Baroid

Corp., Baroid Drilling Fluids, Inc., DB Stratabit (USA) Inc., and

Dresser Industries, Inc., Defendants.

Whereas, plaintiff, United States of America, having filed its

Complaint herein on December 23, 1993, and plaintiff and defendants, by

their respective attorneys, having consented to the entry of this Final

Judgment without trial or adjudication of any issue of act or law

herein and without this Final Judgment constituting any evidence

against or an admission by any party with respect to any such issue;

And Whereas, defendants have agreed to be bound by the provisions

of this Final Judgment pending its approval by the Court;

And Whereas, prompt and certain divestiture is the essence of this

agreement, and defendants have represented to plaintiff that the

divestiture required below can and will be made and that defendants

will later raise no claims of hardship or difficulty as grounds for

asking the Court to modify any of the divestiture provisions contained

below;

Now, Therefore, before the taking of any testimony and without

trial or adjudication of any issue of fact or law herein, and upon

consent of the parties hereto, it is hereby

Ordered, Adjudged and Decreed as follows:

I

Jurisdiction

The Court has jurisdiction over the subject matter of this action

and over each of the parties hereto. The Complaint states a claim upon

which relief may be granted against defendants under section 7 of the

Clayton Act, as amended (15 U.S.C. 18).

II

Definitions

As used in this Final Judgment:

A. ``Baroid'' means defendant Baroid Corporation; each division,

subsidiary, or affiliate thereof, excluding Dresser, and each officer,

director, employee, attorney, agent, or other person acting for or on

behalf of any of them.

B. ``Baroid Drilling'' means defendant Baroid Drilling Fluids,

Inc., which is a wholly owned subsidiary of Baroid; each division,

subsidiary, or affiliate thereof, excluding Dresser, and each officer,

director, employee, attorney, agent or other person acting for or on

behalf of any of them.

C. ``DBS'' means defendant DB Stratabit (USA) Inc., which is a

wholly owned subsidiary of Baroid; each division, subsidiary, or

affiliate thereof, excluding Dresser, and each officer, director,

employee, attorney, agent or other person acting for or on behalf of

any of them.

D. ``Dresser'' means defendant Dresser Industries, Inc.; each

division, subsidiary, or affiliate thereof, excluding Baroid, and each

officer, director, employee, attorney, agent, or other person acting

for or on behalf of any of them.

E. ``Baroid's Diamond Bit Business'' means all assets owned or

controlled by Baroid, including all assets owned or controlled by DBS,

that are or have been used in the United States to research, develop,

test, manufacture, service, or market its diamond drill bits. Baroid's

diamond bit business includes all real property, material, equipment,

supplies, customer lists, contracts and accounts relating to the

manufacture and sale of diamond drill bits in the United States.

Baroid's diamond bit business includes a nonexclusive license to

manufacture and sell matrix diamond bits in the United States and a

nonexclusive license to manufacture and sell steel-bodied diamond bits

anywhere in the world, except The People's Republic of China, using all

intellectual property, including all patents, copyrights, copyright

registrations and applications, trademarks, trademark registrations and

applications, trade names or commercial names, know-how, computer

software programs, and all other tangible and intangible assets,

rights, and other benefits, presently owned, licensed, possessed, or

used by Baroid in the research, development, testing, manufacture,

servicing, or marketing of matrix or steel-bodied diamond bits.

Research and development of diamond drill bits includes, but is not

limited to, engineering support relating to the analysis and testing of

a diamond drill bit's design, application, and components in order to

enhance the bit's performance or to create a new diamond bit. The

nonexclusive licenses granted herein need not be transferable (either

by assignment or sublicense), except in connection with the sale of all

or substantially all of Baroid's diamond bit business. Baroid's diamond

bit business also includes all data from research and development

projects relating to matrix and/or steel-bodied drill bits undertaken

by Baroid at any time up to and including the date of the divestiture

required by section V of this Final Judgment, including the research

and development projects currently being conducted by Baroid that

relate to new Thermally Stable Polycrystalline diamond bits, new

impregnated bits, anti-balling features, air drilling, Polycrystalline

Diamond Compact Bit research, surface set bit, LX bits, and BiCenter

bits. Baroid's diamond bit business does not include data from the bit

dynamics research project Baroid is conducting in conjunction with

Royal Dutch Shell. Baroid's diamond bit business also includes

equipment owned or controlled by Baroid that has been used in the

United States to research, develop, and test Baroid's diamond drill

bits and materials for those bits. This equipment includes, but is not

limited to, each of the following items or the functional equivalent

thereof: CAD/CAM System Software; Stereoscope; Optical Microscope;

Light Microscope; DEC Station 3100; Stereo Microscope; Rockwell

Hardness Testing equipment; and Surface Grinder. In addition, included

in Baroid's diamond bit business is the right for two years to have

access to, at defendants' variable cost, the following equipment

located in Belgium: Coordinate Measurement Machine; Finite Elements

Package; Atmospheric Drilling Machine; Single Cutter Tester; Flow

Visualization Loop with High Speed Carriers; Lab Furnace under

Controlled Atmosphere; and High Speed Data Acquisition System. The

defendants shall pay the cost of shipping up to three diamond drill

bits per calendar quarter to Belgium. Also included in Baroid's diamond

bit business is a hard copy and copy of all computer tapes or discs

containing any data in the possession of Baroid at any time up to and

including the date of the divestiture required by section V of this

Final Judgment, such as bit records or off-set well information, which

record the performance anywhere in the world of any matrix or steel-

bodied diamond bits manufactured or sold by Baroid or any other

producer of diamond drill bits.

Baroid's diamond bit business includes its diamond drill bit

manufacturing facilities in Houston, Texas, and all equipment,

supplies, data, documents and inventories (other than Baroid's

inventory of diamonds and diamond drill bits held for sale) contained

therein, as well as equipment owned or controlled by Baroid on

September 7, 1993 that has been used in the United States by Baroid to

manufacture matrix diamond bits. The equipment in the Houston facility

includes, but is not limited to, the following: LS Bonding Units,

Kuraki CNC Mills, Okuma CNC Lathe, Yuasa Lathe, Axelson Lathe,

Timemaster Lathe, and Bryant Grinder. The equipment formerly used by

Baroid to manufacture matrix diamond bits includes, but is not limited

to, the following: Norton Lathe, 18'' Kohema Lathe, 20'' Kohema Lathe,

Yuasa Lathe, Allain Mill, Bridgeport Mill, Vanier Mill, Cincinnati Mill

with 90 degree Volstrohead, Blast-It-All Sandblaster, Kelco

Sandlblaster, Positioner (welding), Southbend Oven, Lochhead Haggerty

Furnace and Control Panel, Sunbean Furnace and Control Panel,

Powermatic Band Saw, Two 360 degree Layout Chucks, Two Surface Tables,

Matrix Powder Mixer, Micrometers, Height Gauges, Scales, and various

measuring equipment and welding equipment. Baroid's diamond bit

business shall not include any rights, including trademarks and service

marks, associated with the use of the trade names or commercial names

of Stratabit, DB Stratabit Inc., DBS, Diamond Boart, or any derivative

thereof; provided, however, that in the marketing of its diamond drill

bits the purchaser of Baroid's diamond bit business will possess the

right for two years following the date of divestiture to identify its

diamond drill bits as being manufactured pursuant to a license from

DBS.

F. ``Diamond drill bits'' means natural diamond drill bits and

polycrystalline diamond compact drill bits. Diamond drill bits do not

include coring bits.

G. ``Drilling fluid'' means a mixture of natural and synthetic

chemical compounds used at petrocarbon drilling sites to cool and

lubricate the drill bit, clean the hole bottom, carry cuttings to the

surface, seal porous well formations, control downhole pressures, and

improve the function of the drilling string and tools in the hole.

H. ``Drilling fluid business'' means either one of the following:

(1) Dresser's interest in M-I Drilling Fluids Co.; or (2) all assets of

Baroid Drilling and any other assets that Baroid owns or has an

interest in that are used to research, develop, test, produce,

manufacture, service, or market, domestically or internationally,

drilling fluids, including, but not limited to, all barite, bentonite,

and other mineral mines; chemical plants; mineral grinding and

processing plants; other real property; material; equipment; supplies;

customer lists; contracts and accounts; patents; copyrights; copyright

registrations and applications; trademarks; trademark registrations and

applications; trade names or commercial names; know-how; computer

software programs; and all other tangible and intangible assets,

rights, and other benefits, presently owned, licensed, possessed, or

used by Baroid in the research, development, testing, production,

manufacture, servicing or marketing of drilling fluids.

I. ``Matrix diamond bits'' means diamond drill bits comprised of a

body made of a tungsten carbide matrix and cutters brazed onto the bit

body or cast into or around the cutting element of the matrix material.

J. ``Steel-bodied diamond bits'' means diamond drill bits comprised

of a body made of steel and cutters attached to the bit body by an

interference fit or a braze process.

K. ``Person'' means any natural person, corporation, association,

firm, partnership, or other business or legal entity.

III

Applicability

A. The provisions of this Final Judgment shall apply to the

defendants, to their successors and assigns, to their subsidiaries,

affiliates, directors, officers, managers, agents, and employees, and

to all other persons in active concert or participation with any of

them who shall have received actual notice of this Final Judgment by

personal service or otherwise.

B. Defendants shall require, as a condition of the sale or other

disposition of all or substantially all of their assets or stock, or of

the assets required to be divested herein, that the acquiring party

agree to be bound by the provisions of this Final Judgment.

C. Nothing herein shall suggest that any portion of this Final

Judgment is or has been created for the benefit of any third party, and

nothing herein shall be construed to provide any rights to any third

party.

IV

Divestiture of Drilling Fluid Business

A. Defendants are hereby ordered and directed to divest all of

their direct and indirect ownership and control of the drilling fluid

business to a purchaser prior to June 1, 1994.

B. If defendants have not accomplished the required divestiture

prior to June 1, 1994, plaintiff may, in its sole discretion, extend

this time period for an additional period of time not to exceed one

month.

C. Defendants agree to take all reasonable steps to accomplish

quickly said divestiture. In carrying out their obligation to divest

the drilling fluid business, defendants may divest these operations

alone, or may divest along with these operations any other assets of

Baroid or Dresser.

D. In accomplishing the divestiture ordered by this Final Judgment,

the defendants promptly shall make known in the United States and in

other major countries, by usual and customary means, the availability

of the drilling fluid business, for sale as an ongoing business. The

defendants shall notify any person making an inquiry regarding the

possible purchase of this operation that the sale is being made

pursuant to this Final Judgment and provide such person with a copy of

the Final Judgment. The defendants shall also offer to furnish to all

bona fide prospective purchasers of the drilling fluid business,

subject to customary confidentiality assurances, all pertinent

information regarding the drilling fluid business, except information

subject to attorney-client privilege or attorney work product

privilege. Defendants shall make available such information to the

plaintiff at the same time that such information is made available to

any other person. Defendants shall permit prospective purchasers of the

drilling fluid business to have access to personnel at the drilling

fluid business and to make such inspection of physical facilities and

any and all financial, operational, or other documents and information

as may be relevant to the sale of the drilling fluid business.

Defendants shall not be required to permit prospective purchasers to

have access to any documents or information relevant to the drilling

fluid business, except to the extent included in the drilling fluid

business.

E. Divestiture required by section IV of the Final Judgment shall

be accomplished in such a way as to satisfy plaintiff, in its sole

discretion, that the drilling fluid business can and will be operated

by the purchaser as a viable, ongoing business engaged in the

manufacture and sale of drilling fluids in the United States.

Divestiture shall be made to a purchaser for whom it is demonstrated to

plaintiff's satisfaction that (1) the purchase is for the purpose of

competing effectively in the manufacture and sale of drilling fluids in

the United States, and (2) the purchaser has the managerial,

operational, and financial capability to compete effectively in the

manufacture and sale of drilling fluids in the United States.

F. The defendants shall not sell the drilling fluid business to

Baker Hughes, Inc., Schlumberger Ltd., or Anchor Drilling Fluids, or

any of their affiliates of subsidiaries during the life of this decree.

The purchaser of the divested drilling fluid business shall not sell

the drilling fluid business to, or combine that business with the

drilling fluid operations of, Dresser Industries, Inc., Baker Hughes,

Inc., Schlumberger Ltd., or Anchor Drilling Fluids, or any of their

affiliates or subsidiaries during the life of this decree.

G. Except to the extent otherwise approved by plaintiff, any assets

of the drilling fluid business divested pursuant to this Final Judgment

shall be divested free and clear of all mortgages, encumbrances and

liens to Baroid or Dresser.

V

Divestiture of Baroid's Diamond Bit Business

A. Defendants are hereby ordered and directed to divest to a

purchaser prior to July 1, 1994 all of their direct and indirect

ownership and control of Baroid's diamond bit business. The obligation

to divest shall be satisfied if, by July 1, 1994, defendants enter into

a binding contract for sale of Baroid's diamond bit business to a

purchaser according to terms approved by plaintiff that is contingent

only upon compliance with the terms of this Final Judgment and that

specifies a prompt and reasonable closing date no later than September

1, 1994, and if sale is completed pursuant to the contract.

B. If defendants have not accomplished the required divestiture

prior to July 1, 1994, plaintiff may, in its sole discretion, extend

this time period for an additional period of time not to exceed three

months, if defendants request such an extension and demonstrate to

plaintiff's satisfaction that they are then engaged in negotiations

with a prospective purchaser that are likely to result in the required

divestiture but that the divestiture cannot be completed prior to July

1, 1994.

C. Defendants agree to take all reasonable steps to accomplish

quickly said divestiture. In carrying out their obligation to divest

Baroid's diamond bit business, defendants may divest these operations

alone, or may divest along with these operations any other assets of

Baroid or Dresser.

D. In accomplishing the divestiture ordered by this Final Judgment,

the defendants promptly shall make known in the United States and in

other major countries, by usual and customary means, the availability

of Baroid's diamond bit business, for sale as an ongoing business. The

defendants shall notify any person making an inquiry regarding the

possible purchase of this operation that the sale is being made

pursuant to this Final Judgment and provide such person with a copy of

the Final Judgment. The defendants shall also offer to furnish to all

bona fide prospective purchasers of Baroid's diamond bit business,

subject to customary confidentiality assurances, all pertinent

information regarding Baroid's diamond bit business, except information

subject to attorney-client privilege or attorney work product

privilege. Defendants shall make available such information to the

plaintiff at the same time that such information is made available to

any other person. Defendants shall permit prospective purchasers of

Baroid's diamond bit business to have access to personnel at Baroid's

diamond bit business and to make such inspection of physical facilities

and any and all financial, operational, or other documents and

information as may be relevant to the sale of Baroid's diamond bit

business. Defendants shall not be required to permit prospective

purchasers to have access to any documents or information relevant to

Dresser's diamond bit business, except to the extent included in

Baroid's diamond bit business.

E. Divestiture required by section V of the Final Judgment shall be

accomplished in such a way as to satisfy plaintiff, in its sole

discretion, that Baroid's diamond bit business can and will be operated

by the purchaser as a viable, ongoing business engaged in the

manufacture and sale of diamond drill bits in the United States.

Divestiture shall be made to a purchaser for whom it is demonstrated to

plaintiff's satisfaction that (1) the purchase is for the purpose of

competing effectively in the manufacture and sale of diamond drill bits

in the United States, including the ability to conduct research,

development, and testing of diamond bits, and (2) the purchaser has the

managerial, operational, and financial capability to compete

effectively in the manufacture and sale of diamond drill bits in the

United States.

F. The defendants shall not sell Baroid's diamond bit business to

Baker Hughes, Inc., Camco International, Inc., Smith International,

Inc., or any of their affiliates or subsidiaries during the life of

this decree. The purchaser of Baroid's diamond bit business shall not

sell that business to, or combine that business with the diamond drill

bit operations of, Dresser Industries, Inc., Baker Hughes, Inc., Camco,

Inc., Smith International, Inc., or any of their affiliates or

subsidiaries during the life of this decree.

G. Except to the extent otherwise approved by plaintiff, Baroid's

diamond bit business divested pursuant to this Final Judgment shall be

divested free and clear of all mortgages, encumbrances and liens to

Baroid or Dresser.

VI

Appointment of Trustee For the Drilling Fluid Business

A. If defendants have not accomplished the divestiture required by

section IV of the Final Judgment by April 29, 1994, defendants shall

notify plaintiff of that fact. Within ten (10) days of that date, or

twenty (20) days prior to the expiration of any extension granted

pursuant to Section IV(B), whichever is later, plaintiff shall provide

defendants with written notice of the names and qualifications of not

more than two (2) nominees for the position of trustee for the required

divestiture. Defendants shall notify plaintiff within ten (10) days

thereafter whether either or both of such nominees are acceptable. If

either or both of such nominees are acceptable to defendants, plaintiff

shall notify the Court of the person upon whom the parties have agreed

and the Court shall appoint that person as the trustee. If neither of

such nominees is acceptable to defendants, they shall furnish to

plaintiff, within ten (10) days after plaintiff provides the names of

its nominees, written notice of the names and qualifications of not

more than two (2) nominees for the position of trustee for the required

divestiture. If either or both of such nominees are acceptable to

plaintiff, plaintiff shall notify the Court of the person upon whom the

parties have agreed and the Court shall appoint that person as the

trustee. If neither of such nominees is acceptable to plaintiff, it

shall furnish the Court the names and qualifications of its proposed

nominees and the names and qualifications of the nominees proposed by

defendants. The Court may hear the parties as to the qualifications of

the nominees and shall appoint one of the nominees as the trustee.

B. If defendants have not accomplished the divestiture required by

section IV of this Final Judgment at the expiration of the time period

specified in section IV(A) and IV(B) of this Final Judgment, as

applicable, the appointment by the Court of the trustee shall become

effective. The trustee shall then take steps to effect divestiture of

the drilling fluid business.

C. After the trustee's appointment has become effective, only the

trustee shall have the right to sell the drilling fluid business. The

trustee shall have the power and authority to accomplish the

divestiture to a purchaser acceptable to plaintiff at such price and on

such terms as are then obtainable upon a reasonable effort by the

trustee, subject to the provisions of section VIII of this Final

Judgment, and shall have such other powers as this Court shall deem

appropriate. Defendants shall not object to a sale of the drilling

fluids business by the trustee on any grounds other than the trustee's

malfeasance. Any such objection by defendants must be conveyed in

writing to plaintiff and the trustee within fifteen (15) days after the

trustee has notified defendants of the proposed sale in accordance with

section VIII of this Final Judgment.

D. The trustee shall serve at the cost and expense of defendants,

shall receive compensation based on a fee arrangement providing an

incentive based on the price and terms of the divestiture and the speed

with which it is accomplished, and shall serve on such other terms and

conditions as the Court may prescribe; provided, however, that the

trustee shall receive no compensation, no incur any costs or expenses,

prior to the effective date of his or her appointment. The trustee

shall account for all monies derived from a sale of the drilling fluid

business and all costs and expenses incurred in connection therewith.

After approval by the Court of the trustee's accounting, including fees

for its services, all remaining monies shall be paid to defendants and

the trust shall then be terminated.

E. Defendants shall take no action to interfere with or impede the

trustee's accomplishment of the divestiture of the drilling fluid

business and shall use their best efforts to assist the trustee in

accomplishing the required divestiture. The trustee shall have full and

complete access to the personnel, books, records, and facilities of the

drilling fluid business, and defendants shall develop such financial or

other information relevant to the drilling fluid business.

F. After its appointment becomes effective, the trustee shall file

monthly reports with the parties and the Court setting forth the

trustee's efforts to accomplish divestiture of the drilling fluid

business as contemplated under this Final Judgment; provided, however,

that to the extent such reports contain information that the trustee

deems confidential, such reports shall not be filed in the public

docket of the Court. Such reports shall include the name, address, and

telephone number of each person who, during the preceding thirty (30)

days, made an offer to acquire, expressed an interest in acquiring,

entered into negotiations to acquire, or was contacted or made an

inquiry about acquiring, any ownership interest in the drilling fluid

business, and shall describe in detail each contact with any such

person during that period. The trustee shall maintain full records of

all efforts made to divest these operations.

G. Within six months after its appointment has become effective, if

the trustee has not accomplished the divestiture required by section VI

of this Final Judgment, the trustee shall promptly file with the Court

a report setting forth (1) the trustee's efforts to accomplish the

required divestiture, (2) the reasons, in the trustee's judgment, why

the required divestiture has not been accomplished, and (3) the

trustee's recommendations; provided, however, that to the extent such

reports contain information that the trustee deems confidential, such

reports shall not be filed in the public docket of the Court. The

trustee shall at the same time furnish such report to the parties, who

shall each have the right to be heard and to make additional

recommendations consistent with the purpose of the trust. The Court

shall thereafter enter such orders as it shall deem appropriate in

order to carry out the purpose of the trust, which shall, if necessary,

include extending the trust and the term of the trustee's appointment.

VII

Appointment of Trustee for Baroid's Diamond Bit Business

A. If defendants have not accomplished the divestiture required by

section V of the Final Judgment by May 30, 1994, defendants shall

notify plaintiff of that fact. Within ten (10) days of that date, or

twenty (20) days prior to the expiration of any extension granted

pursuant to section V(B), whichever is later, plaintiff shall provide

defendants with written notice of the names and qualifications of not

more than two (2) nominees for the position of trustee for the required

divestiture. Defendants shall notify plaintiff within ten (10) days

thereafter whether either or both of such nominees are acceptable. If

either or both of such nominees are acceptable to defendants, plaintiff

shall notify the Court of the person upon whom the parties have agreed

and the Court shall appoint that person as the trustee. If neither of

such nominees is acceptable to defendants, they shall furnish to

plaintiff, within ten (10) days after plaintiff provides the names of

its nominees, written notice of the names and qualifications of not

more than two (2) nominees for the position of trustee for the required

divestiture. If either or both of such nominees are acceptable to

plaintiff, plaintiff shall notify the Court of the person upon whom the

parties have agreed and the Court shall appoint that person as the

trustee. If neither of such nominees is acceptable to plaintiff, it

shall furnish the Court the names and qualifications of its proposed

nominees and the names and qualifications of the nominees proposed by

defendants. The Court may hear the parties as to the qualifications of

the nominees and shall appoint one of the nominees as the trustee.

B. If defendants have not accomplished the divestiture required by

section V of this Final Judgment at the expiration of the time period

specified in section V(A) and V(B) of this Final Judgment, as

applicable, the appointment by the Court of the trustee shall become

effective. The trustee shall then take steps to effect divestiture of

Baroid's diamond bit business; provided, however, that the appointment

of the trustee shall not become effective if, prior to expiration of

the applicable time period, defendants have notified plaintiff pursuant

to section VIII of this Final Judgment of a proposed divestiture of

Baroid's diamond bit business and plaintiff has not filed a written

notice that it objects to said proposed divestiture. When the

appointment of the trustee becomes effective, Baroid's diamond bit

business will include a nonexclusive license to manufacture and sell

steel-bodied bits anywhere in the world, including The People's

Republic of China.

C. After the trustee's appointment has become effective, only the

trustee shall have the right to sell Baroid's diamond bit business. The

trustee shall have the power and authority to accomplish the

divestiture to a purchaser acceptable to plaintiff at such price and on

such terms as are then obtainable upon a reasonable effort by the

trustee, subject to the provisions of section VIII of this Final

Judgment, and shall have such other powers as this Court shall deem

appropriate. Defendants shall not object to a sale of Baroid's diamond

bit business by the trustee on any grounds other than the trustee's

malfeasance. Any such objection by defendants must be conveyed in

writing to plaintiff and the trustee within fifteen (15) days after the

trustee has notified defendants of the proposed sale in accordance with

section VIII of this Final Judgment.

D. The trustee shall serve at the cost and expense of defendants,

shall receive compensation based on a fee arrangement providing an

incentive based on the price and terms of the divestiture and the speed

with which it is accomplished, and shall serve on such other terms and

conditions as the Court may prescribe; provided, however, that the

trustee shall receive no compensation, nor incur any costs or expenses,

prior to the effective date of his or her appointment. The trustee

shall account for all monies derived from a sale of Baroid's diamond

bit business and all costs and expenses incurred in connection

therewith. After approval by the Court of the trustee's accounting,

including fees for its services, all remaining monies shall be paid to

defendants and the trust shall then be terminated.

E. Defendants shall take no action to interfere with or impede the

trustee's accomplishment of the divestiture and shall use their best

efforts to assist the trustee in accomplishing the required

divestiture. The trustee shall have full and complete access to the

personnel, books, records, and facilities of Baroid's diamond bit

business, and defendants shall develop such financial or other

information relevant to Baroid's diamond bit business.

F. After its appointment becomes effective, the trustee shall file

monthly reports with the parties and the Court setting forth the

trustee's efforts to accomplish divestiture of Baroid's diamond bit

business as contemplated under this Final Judgment; provided, however,

that to the extent such reports contain information that the trustee

deems confidential, such reports shall not be filed in the public

docket of the Court. Such reports shall include the name, address, and

telephone number of each person who, during the preceding thirty (30)

days, made an offer to acquire, expressed an interest in acquiring,

entered into negotiations to acquire, or was contacted or made an

inquiry about acquiring, any ownership interest in Baroid's diamond bit

business, and shall describe in detail each contact with any such

person during that period. The trustee shall maintain full records of

all efforts made to divest these operations.

G. Within six months after its appointment has become effective, if

the trustee has not accomplished the divestiture required by Section

VII of this Final Judgment, the trustee shall promptly file with the

Court a report setting forth (1) the trustee's efforts to accomplish

the required divestiture, (2) the reasons, in the trustee's judgment,

why any required divestiture have not been accomplished, and (3) the

trustee's recommendations; provided, however, that to the extent such

reports contain information that the trustee deems confidential, such

reports shall not be filed in the public docket of the Court. The

trustee shall at the same time furnish such report to the parties, who

shall each have the right to be heard and to make additional

recommendations consistent with the purpose of the trust. The Court

shall thereafter enter such orders as it shall deem appropriate in

order to carry out the purpose of the trust, which shall, if necessary,

include extending the trust and the term of the trustee's appointment.

VIII

Notification

Immediately following entry of a binding contract, contingent upon

compliance with the terms of this Final Judgment, to effect any

proposed divestiture pursuant to sections IV, V, VI, or VII of this

Final Judgment, defendants or the trustee, whichever is then

responsible for effecting the divestiture, shall notify plaintiff of

the proposed divestiture. If the trustee is responsible, it shall

similarly notify defendants. The notice shall set forth the details of

the proposed transaction and list the name, address, and telephone

number of each person not previously identified who offered to, or

expressed an interest in or desire to, acquire any ownership interest

in the business that is the subject of the binding contract, together

with full details of same. Within fifteen (15) days of receipt by

plaintiff of such notice, plaintiff may request additional information

concerning the proposed divestiture and the proposed purchaser.

Defendants and/or the trustee shall furnish any additional information

requested within twenty (20) days of the receipt of the request, unless

the parties shall otherwise agree. Within thirty (30) days after

receipt of the notice or within twenty (20) days after plaintiff has

been provided the additional information requested (including any

additional information requested of persons other than defendants or

the trustee), whichever is later, plaintiff shall provide written

notice to defendants and the trustee, if there is one, stating whether

or not it objects to the proposed divestiture. If plaintiff provides

written notice to defendants and/or the trustee that it does not

object, then the divestiture may be consummated, subject only to

defendants' limited right to object to the sale under the provisions in

sections VI(C) and VII(C). Absent written notice that the plaintiff

does not object to the proposed purchaser, a divestiture proposed under

Section IV shall not be consummated. Upon objection by plaintiff, a

divestiture proposed under section V shall not be consummated. Upon

objection by plaintiff, or by defendants under the proviso in sections

VI(C) and VII(C), a divestiture proposed under section VI or VII shall

not be consummated unless approved by the Court.

IX

Affidavits

Upon filing of this Final Judgment and every thirty (30) days

thereafter until the divestitures have been completed or authority to

effect divestiture passes to the trustee pursuant to section VI or

section VII of this Final Judgment, defendants shall deliver to

plaintiff an affidavit as to the fact and manner of compliance with

sections IV and V of this Final Judgment. Each such affidavit shall

include the name, address, and telephone number of each person who, at

any time after the period covered by the last such report, made an

offer to acquire, expressed an interest in acquiring, entered into

negotiations to acquire, or was contacted or made an inquiry about

acquiring, any ownership interest in Baroid's diamond bit business or

the drilling fluid business, and shall describe in detail each contact

with any such person during that period. Defendants shall maintain full

records of all efforts made to divest these operations.

X

Financing

With prior consent of the plaintiff, defendants may finance all or

any part of any purchase made pursuant to sections IV, V, VI, or VII of

this Final Judgment.

XI

Preservation of Assets

Until the divestitures required by the Final Judgment have been

accomplished:

A. The defendants shall take all steps necessary to assure that DBS

and Baroid Drilling will be maintained as separate and independent,

economically viable, ongoing businesses with their assets (including

proprietary technology, management, operations, and books and records)

separate, distinct and apart from those of Dresser. The defendants

shall use all reasonable efforts on behalf of DBS to maintain and

increase sales of diamond drill bits, continue its current plans for

research, development, and testing of diamond drill bits, and otherwise

maintain the business as a viable and active competitor in the United

States. The defendants shall use all reasonable efforts on behalf of

Baroid Drilling and M-I Drilling Fluids Co. to maintain and increase

sales of drilling fluids, continue current plans for research,

development, and testing of drilling fluids, and otherwise maintain the

businesses as viable and active competitors in the United States.

B. The defendants shall not sell, lease, assign, transfer or

otherwise dispose of, or pledge as collateral for loans (except such

loans as are currently outstanding or replacements of substitutes

therefore), assets required to be divested pursuant to sections IV, V,

VI, or VII except that any component of such assets as is replaced in

the ordinary course of business with a newly purchased component may be

sold or otherwise disposed of, provided the newly purchased component

is so identified as a replacement component for one to be divested.

C. The defendants shall provide capital and provide and maintain

sufficient working capital to maintain DBS, including Baroid's diamond

bit business; Baroid Drilling; and M-I Drilling Fluids Co. as viable,

ongoing businesses consistent with the requirements of section XI(A).

D. The defendants shall preserve the assets required to be divested

pursuant to section IV, V, VI, and VII, except those replaced with

newly acquired assets in the ordinary course of business, in a state or

repair equal to their state of repair as of the date of this Final

Judgment, ordinary wear and tear excepted. Defendants shall preserve

the documents, books and records of DBS and Baroid's diamond bit

business until the date of divestiture of Baroid's diamond bit

business, and shall preserve the documents, books and records of Baroid

Drilling and M-I Drilling Fluids Co. until the date of divestiture of

the drilling fluids business.

E. Except in the ordinary course of business, or as is otherwise

consistent with the requirements of section XII, the defendants shall

refrain from terminating or altering one or more current employment,

salary, or benefit agreements for one or more executive, managerial,

sales, marketing, engineering, or other technical personnel of DBS,

Baroid Drilling or M-I Drilling Fluids Co., and shall refrain from

transferring any employee so employed without the prior approval of

plaintiff.

F. Defendants shall refrain from taking any action that would

jeopardize the sale of Baroid's diamond bit business or the drilling

fluid business.

XII

Employment Offers

A. Defendants are hereby enjoined and restrained until one year

following the date of divestiture from employment of, or making offers

of employment to, any person, who currently is an executive,

managerial, sales, marketing, engineering, research and development, or

other technical employee of Baroid in the United States, the

preponderance of whose duties relate to Baroid's diamond bit business

(``Baroid diamond bit employees''.) This provision, however, does not

apply to any employee who is terminated or not hired by the purchaser

of Baroid's diamond bit business. Defendants shall encourage and

facilitate employment of such employees by the purchaser, and shall

remove any impediments that exist which may deter such employees from

accepting employment with the purchaser of Baroid's diamond bit

business, including, but not limited to, the payment of all bonuses to

which such employees would otherwise have been entitled had they

remained in the employment of Baroid until the end of fiscal year 1994.

B. The purchaser of Baroid's diamond bit business shall also have

the right to hire any person who is currently a sales, marketing or

research and development employee of Baroid, the preponderance of whose

duties do not relate to Baroid's diamond bit business. Such offers of

employment and acceptances thereof, contingent upon the consummation of

the purchase of Baroid's diamond bit business, may be made prior to the

consummation of the divestiture. Defendants shall provide any

prospective purchaser with cooperation and assistance in its efforts to

determine which, if any, such Baroid employees it seeks to hire. Such

cooperation and assistance shall include making available for

consultation purposes to any prospective purchasers of Baroid's diamond

bit business all Baroid diamond bit employees, and providing

information sufficient to enable a prospective purchaser to assess the

relative performance of all Baroid sales, marketing and research and

development employees. The defendants may, prior to the time the

appointment of the trustee becomes effective pursuant to section VII,

take any lawful steps they deem appropriate to retain the services of

any Baroid employees the preponderance of whose duties do not relate to

Baroid's diamond bit business.

XIII

Compliance Inspection

For the purposes of determining or securing compliance with the

Final Judgment and subject to any legally recognized privilege, from

time to time:

A. Duly authorized representatives of the Department of Justice

shall, upon written request of the Attorney General or of the Assistant

Attorney General in charge of the Antitrust Division, and on reasonable

notice to any defendant made to its principal office, be permitted:

1. Access during office hours of such defendant to inspect and copy

all books, ledgers, accounts, correspondence, memoranda, and other

records and documents in the possession or under the control of such

defendant, who may have counsel present, relating to any matters

contained in this Final Judgment; and

2. Subject to the reasonable convenience of such defendant and

without restraint or interference from it, to interview officers,

employees, and agents of such defendant, who may have counsel present,

regarding any such matters.

B. Upon the written request of the Attorney General or of the

Assistant Attorney General in charge of the Antitrust Division made to

any defendant's principal office, such defendant shall submit such

written reports, under oath if requested, with respect to any of the

matters contained in this Final Judgment as may be requested.

C. No information or documents obtained by the means provided in

this section XIII shall be divulged by a representative of the

Department of Justice to any person other than a duly authorized

representative of the Executive Branch of the United States, except in

the course of legal proceedings to which the United States is a party

(including grand jury proceedings), or for the purpose of securing

compliance with this Final Judgment, or as otherwise required by law.

D. If at the time information or documents are furnished by any

defendant to plaintiff, such defendant represents and identifies in

writing the material in any such information or documents to which a

claim of protection may be asserted under Rule 26(c)(7) of the Federal

Rules of Civil Procedure, and such defendant marks each pertinent page

of such material, ``Subject to claim of protection under Rule 26(c)(7)

of the Federal Rules of Civil Procedure,'' then ten (10) days notice

shall be given by plaintiff to defendants prior to divulging such

material in any legal proceeding (other than a grand jury proceeding).

XIV

Retention of Jurisdiction

Jurisidction is retained by this Court for the purpose of enabling

any of the parties to this Final Judgment to apply to this Court at any

time for such further orders and directions as may be necessary or

appropriate for the construction or carrying out of this Final

Judgment, for the modification of any of the provisions hereof, for the

enforcement of compliance herewith, and for the punishment of any

violations hereof.

XV

Termination

This Final Judgment will expire on the tenth anniversary of the

date of its entry.

XVI

Public Interest

Entry of this Final Judgment is in the public interest.

Dated:

----------------------------------------------------------------------

United States District Judge

Order

[Civil Action No. 93-2621 (Stanley Sporkin); Filed December 23, 1993]

In the matter of United States of America, Plaintiff, v. Baroid

Corp. et al., Defendants.

With the approval of the parties, it is hereby: Ordered, That the

proposed Final Judgment in this case, as referenced in the Stipulation

signed on the 23rd day of December, 1993 is hereby modified as follows:

Any mention in such proposed Final Judgment that the Court shall

appoint an individual to a particular position is hereby understood to

mean that the Court shall appoint said individual only if the Court

deems said individual to be suitable for the position.

In the event that the Court does not find said individual to be

suitable for the position, a new nominee shall be presented to the

Court, as set forth in the procedures found in the proposed Final

Judgment, for the Court's approval and said procedure shall be followed

until the Court finds an individual acceptable to the Court.

Date: December 23, 1993.

Stanley Sporkin,

United States District Court.

Competitive Impact Statement

[Civil Action No. 93-2621 (Stanley Sporkin); Filed: December 23, 1993]

Judge Sporkin

In the matter of United States of America, Plaintiff; v. Baroid

Corp., Baroid Drilling Fluids, Inc., DB Stratabit (USA) Inc., and

Dresser Industries Inc., Defendants.

Pursuant to section 2(b) of the Antitrust Procedures and Penalties

Act (``APPA''), 15 U.S.C. 16 (b)-(h), the United States of America

files this Competitive Impact Statement relating to the proposed Final

Judgment submitted for entry with the consent of Baroid Corporation,

Baroid Drilling Fluids, Inc., DB Stratabit (USA) Inc., and Dresser

Industries, Inc. in this civil antitrust proceeding.

I

Nature and Purpose of the Proceeding

On December 23, 1993, the United States filed a Complaint alleging

that the proposed merger of Dresser Industries, Inc. (``Dresser'') and

Baroid Corporation (``Baroid'') would violate Section 7 of the Clayton

Act (15 U.S.C. 18). The Complaint alleges that the effect of the merger

may be substantially to lessen competition in the manufacture and sale

in the United States of drilling fluids, which Dresser, through its 64

percent partnership interest in M-I Drilling Fluids, Co. (``M-I''), and

Baroid, through its wholly owned subsidiary, Baroid Drilling Fluids,

Inc. (``Baroid Drilling''), produce and sell. The Complaint also

alleges that the effect of the merger may be substantially to lessen

competition in the manufacture and sale in the United States of diamond

drill bits, which both Dresser's Security Division (``Security'') and

Baroid's wholly owned subsidiary DB Stratabit (USA) Inc. (``DBS'')

manufacture and sell. Both drilling fluids and diamond drill bits are

used by energy exploration and development companies to drill oil and

gas wells. The Complaint seeks, among other relief, a permanent

injunction preventing defendants from, in any manner, combining their

drilling fluid and diamond drill bit businesses.

On December 23, 1993, the United States and defendants filed a

stipulation by which they consented to the entry of a proposed Final

Judgment designed to eliminate the anticompetitive effects of the

merger. Under the proposed Final Judgment, as explained more fully

below, defendants would be required to sell, by June 1, 1994, either

Baroid Drilling or Dresser's interest in M-I. By July 1, 1994,

defendants would also have to divest Baroid's domestic diamond drill

bit business, including a manufacturing plant in Houston, Texas, as

well as licenses for DBS patents and technology to make and sell DBS

diamond drill bits domestically and to a significant extent throughout

the world. If defendants should fail to complete either or both of the

divestitures, a trustee appointed by the Court would be empowered to

complete them.

The United States, Dresser, and Baroid have agreed that the

proposed Final Judgment may be entered after compliance with the APPA.

Entry of the proposed Final Judgment will terminate the action, except

that the Court will retain jurisdiction to construe, modify and enforce

the Final Judgment, and to punish violations of the Final Judgment.

II

Events Giving Rise to the Alleged Violation

On September 7, 1993, Dresser and Baroid entered into a purchase

agreement under which the two companies would merge and Baroid would

become a wholly-owned subsidiary of Dresser. This acquisition would, if

unchallenged, effectively merge all of the businesses of Dresser and

Baroid, including their drilling fluid and diamond drill bit

businesses. The purchase price is approximately $900 million.

Dresser and Baroid are both large, diversified oil field service

companies that provide a wide variety of products and services

necessary to explore for and develop oil and gas reserves. Dresser

reported total 1992 sales of about $3.8 billion; Baroid's total 1992

sales were approximately $614.4 million.

The Complaint alleges that there are two markets in which Dresser

and Baroid are significant competitors. Those two markets are the

manufacture and sale in the United States of drilling fluids and the

manufacture and sale in the United States of diamond drill bits.

Both products are used by drilling operators to drill for oil and

gas. Wells are drilled using a drill pipe (or ``drill string''), which

is a heavy-walled pipe assembled end-to-end from thirty- to forty-foot

sections. The drill string is suspended from the mast of a drilling rig

and lowered gradually as the earth is penetrated. As the drill string

is rotated, the earth is cut by a drill bit,\1\ which is attached to

the end of the drill string or to a motor that is attached to the end

of the drill string. Drilling fluid is pumped under pressure through

the drill string to the drill bit at the end of the string. Drilling

fluid, a mixture of natural and synthetic chemical compounds

(principally barite and bentonite), improves the performance and

durability of the drill string and the tools in the hole by, for

example, cooling and lubricating the drill bit and controlling downhole

pressure.

---------------------------------------------------------------------------

\1\There are two types of drill bits: tricone drill bits and

diamond drill bits. Tricone bits consist of three steel cones that

rotate as the bit turns. Diamond drill bits have no moving parts but

contain cutting elements made of natural or synthetic diamond

embedded in the bottom and sides of a steel or matrix body. The kind

of drill bits used in a particular drilling operation depends upon

the depth of the well, the direction of the drilling, the type of

formation through which the drill bit must cut, and the type of

drilling fluid used. Diamond drill bits provide higher penetration

rates, better durability, and require the drill string to be pulled

out of the well hole fewer times than tricone bits. Diamond bits

typically cost between three and eight times as much as tricone

bits. Where daily drilling costs are high and the geological

conditions are suitable, customers prefer to use diamond bits over

tricone bits in order to reduce drilling time and, thereby, lower

overall costs.

---------------------------------------------------------------------------

Both drilling fluids and diamond drill bits are critical products

for oil and gas exploration and development. The use of an incorrectly

formulated drilling fluid can result in a costly, dangerous hole blow-

out or the immobilization of the drill string. The percentage of total

drilling costs accounted for by drilling fluids can be as high as 10

percent. The percentage of total drilling costs accounted for by drill

bits is less, usually no more than 5 percent, but the cost of a bit

failure can be very high. Valuable drilling time is lost because the

entire drill string must be pulled out of the hole, disassembled, a new

bit attached, and the drill string reassembled and run back into the

hole.

M-I is a vertically integrated company with mining operations,

manufacturing plants, research and engineering facilities, distribution

facilities and sales and service centers located throughout the world.

M-I's worldwide, net sales of drilling fluids for fiscal year 1992 and

$383.6 million. Its domestic sales were approximately $110 million.

Baroid Drilling produces and sells drilling fluids through a

distribution network consisting of approximately 150 onshore and

offshore stockpoints and over 50 field laboratories. In 1992, Baroid

Drilling's worldwide, net sales were $331.5 million, and its domestic

sales were approximately $100 million.

Dresser's Security Division has a diamond drill bit manufacturing

facility in Houston, Texas. Dresser's total 1992 worldwide sales of

diamond drill bits were about $10.4 million and its U.S. sales of that

product were about $4.7 million. Baroid produces diamond drill bits at

manufacturing facilities located in Houston, Texas, Brussels, Belgium,

and Leduc, Alberta, Canada. Baroid's 1992 worldwide sales of diamond

drill bits were approximately $40 million, and its domestic sales were

about $3.6 million. Baroid's domestic diamond drill bit operations are

handled through its DBS subsidiary.

The Complaint alleges that the manufacture and sale of drilling

fluids is a relevant product market for antitrust purposes. A small,

significant nontransitory price increase would not cause customers to

use another product instead of drilling fluid. The United States is a

relevant geographic market for the drilling fluid market within the

meaning of Section 7 of the Clayton Act. The Complaint states that this

market is highly concentrated and would become substantially more

concentrated as a result of the merger of Baroid and Dresser. Three

companies dominate the drilling fluid business in the United States,

including M-I and Baroid Drilling. Based on 1992 sales data,

M-I was the largest firm in the drilling fluid market, accounting for

about 29 percent of sales, while Baroid Drilling, the second largest

firm, accounted for about 22 percent. The merger of Dresser and Baroid

would increase the Herfindahl-Hirschman Index by about 1200 points to a

post-acquisition level of more than 2800 points. The merger of Dresser

and Baroid will diminish competition in the drilling fluid market by

enabling the remaining competitors more likely, more successfully, and

more completely to engage in coordinated interaction that harms

customers. The increase in concentration will result in higher prices

for drilling fluids, which will increase the costs of oil and gas

exploration and development in the United States.

Successful new entry into the United States drilling fluid market

is difficult and time-consuming. Moreover, the expansion of fringe

firms would be insufficient to counteract or deter a small but

significant nontransitory price increase. To gain a significant market

share, a firm must have an adequate, reliable, and independent source

of barite and bentonite and a significant research and development

capability. Because the costs to the customer of product failure are so

high, the firm must also have a reputation for providing a reliable

product and dependable service. The establishment of such a reputation

takes years and requires a significant investment of resources.

The Complaint also alleges that the manufacture and sale of diamond

drill bits is a relevant product market for antitrust purposes. A

small, significant nontransitory increase in the price of diamond drill

bits would not cause customers to use another product. The United

States is a relevant geographic market for this product market within

the meaning of section 7 of the Clayton Act. The Complaint states that

this market is concentrated, with five companies, including Dresser and

Baroid, accounting for approximately 90 percent of all diamond drill

bit sales in the United States. These five companies have established

reputations for providing dependable diamond drill bits for almost all

types of drilling operations, backed by extensive product research,

development, and testing. For a significant number of drilling

projects, only these five companies have the product quality,

performance record, and engineering support required to be considered

by customers as a supplier of diamond drill bits.

The United States diamond drill bit market would become

significantly more concentrated as a result of the merger of Dresser

and Baroid. Based on 1992 sales data, Dresser was the third largest

firm in the diamond drill bit market, accounting for about 13 percent

of sales, while Baroid, the fifth largest firm, accounted for about 10

percent. The merger of Dresser and Baroid would result in a competitor

having almost 25 percent of U.S. diamond drill bit sales, and would

increase the Herfindahl-Hirschman index by more than 250 points to a

post-acquisition level of more than 2300. As a result of the

acquisition, four firms would account for approximately 90 percent of

sales. The merger of Dresser and Baroid will diminish competition in

the United States diamond drill bit market by enabling the remaining

competitors more likely, more successfully, and more completely to

engage in coordinated interaction that harms customers. This increase

in concentration would result in higher prices for diamond drill bits,

which will increase the cost of oil and gas exploration and development

in the United States.

Entry into the United States market for diamond drill bits is

difficult, expensive, and time-consuming. To enter the diamond drill

bit market and gain a significant market share, a firm must build a

manufacturing and research and development facility, develop diamond

bits, and establish a reputation for the efficiency, durability, and

reliability of its product under actual drilling conditions in a wide

variety of different geographic and geological conditions. Because the

performance of a bit is critical to assuring the lowest possible

drilling costs, and the risk of financial loss due to bit failure is

substantial, customers are generally very reluctant to purchase bits

from a new supplier that lacks a proven performance record. It would

take several years and significant investment for a new supplier to

establish a performance record and obtain the sales that are necessary

to support the substantial engineering, technical services, and

research and development capabilities possessed by the five major

competitors in this market.

III

Explanation of the Proposed Final Judgment

The United States brought this action because the effect of the

proposed merger of Dresser and Baroid may be substantially to lessen

competition, in violation of section 7 of the Clayton Act, in the

United States for the manufacture and sale of drilling fluids and the

manufacture and sale of diamond bits. The risk to competition posed by

this transaction, however, would be substantially eliminated were

defendants to divest either Baroid Drilling or Dresser's interest in M-

I, and Baroid's diamond bit business, as defined in the proposed Final

Judgment, to a purchaser or purchasers that would operate the

businesses as active, independent, and financially viable United States

competitors in the respective product markets. To this end, the

provisions of the proposed Final Judgment are designed to accomplish

the sale of a drilling fluid business as well as the sale of Baroid's

diamond bit business and to prevent the anticompetitive effects of the

proposed acquisition.

Section IV of the proposed Final Judgment requires defendants to

divest the ``drilling fluid business'' by June 1, 1994, to a purchaser

that has the intent and capability to compete promptly and effectively

in the manufacture and sale of drilling fluids in the United States.

The ``drilling fluid business'' is defined in the proposed Final

Judgment as either Dresser's 64 percent interest in M-I, or all assets

of Baroid Drilling and any other assets that Baroid owns or has an

interest in that are used to research, develop, test, produce,

manufacture, service or market, domestically or internationally,

drilling fluids. If the divestiture has not occurred by June 1, 1994,

the United States may, in its sole discretion, extent the time period

up to one month. The proposed Final Judgment prohibits the sale by the

defendants of the drilling fluid business to their major competitors in

the drilling fluid market: Baker Hughes, Inc., Schlumberger Ltd., and

Anchor Drilling Fluids. This prohibition lasts for the life of the

decree. The purchaser of the drilling fluid business is also prohibited

from combining that business with the drilling operations of any of

those three companies or Dresser.

Section V of the proposed Final Judgment requires defendants to

divest ``Baroid's diamond bit business'' by July 1, 1994, to a

purchaser that has the intent and capability to compete promptly and

effectively in the manufacture and sale of diamond bits in the United

States. ``Baroid's diamond bit business'' is defined in the proposed

Final Judgment as the assets owned or controlled by Baroid that are or

have been used in the United States to research, develop, test,

manufacture, service or market its diamond drill bits. The assets to be

divested include Baroid's diamond bit manufacturing facility in

Houston, Texas, all equipment in that plant, and all equipment owned or

controlled by Baroid that was used to manufacture matrix diamond

bits.\2\ Baroid's diamond bit business also includes a nonexclusive

license to manufacture and sell matrix diamond bits in the United

States and a nonexclusive license to manufacture and sell steel-bodied

diamond bits anywhere in the world, except The People's Republic of

China, using all patents and other intellectual property owned or

controlled by Baroid. These licenses will allow the purchaser to be an

effective competitor in the United States diamond drill bit market. The

business divested will additionally include research and development

equipment in the Houston plant and access for two years to certain

pieces of research and development equipment in Baroid's Belgium

facility, as well as data from almost all research and development

projects relating to matrix or steel-bodied drill bits undertaken by

Baroid up to and including the date of the divestiture. Research and

development of diamond drill bits includes, but is not limited to,

engineering support relating to the analysis and testing of a diamond

drill bit's design, application, and components in order to enhance the

bit's performance or to create a new diamond bit. In addition, Baroid's

diamond bit business includes all data recording diamond bit

performance in Baroid's possession at the date of divestiture. The

purchaser also has the right for two years to market its diamond bits

as being manufactured pursuant to a license from DBS but will not have

the right to use the trade names of ``Stratabit,'' ``DB Stratabit,

Inc.,'' ``Diamont Boart,'' ``DBS,'' or any derivative thereof. The

licenses granted need not be transferable, and thus remain with the

original purchaser in perpetuity unless transferred in connection with

the sale of all or substantially all of Baroid's diamond bit business.

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\2\There are two basic designs of diamond drill bits: Matrix

diamond bits and steel-bodied diamond bits. Baroid currently

manufactures only steel-bodied diamond bits, at the Houston

facility. In the past it also manufactured matrix diamond bits at

the plant. Some equipment that was used for manufacturing matrix

diamond bits is in storage.

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The divestiture requirement will be satisfied if the defendants

have entered a binding contract to sell Baroid's diamond bit business

by July 1, 1994, as long as the divestiture will be completed by

September 1, 1994. Also, if the defendants have not accomplished the

required divestiture by July 1, but demonstrate to the United States'

satisfaction that they are then engaged in negotiations with a

prospective purchaser that are likely to result in the required

divestiture, the United States may extend the time period for

divestiture up to three more months. The defendants are prohibited by

the proposed Final Judgment from selling Baroid's diamond bit business

to their major competitors in the diamond drill bit market: Baker

Hughes, Inc., Smith International, Inc., and Camco International, Inc.

That prohibition lasts for the life of the decree. The purchaser of

Baroid's diamond bit business is also prohibited from combining that

business with the diamond drill bit operations of any of those

companies or Dresser for the life of the decree.

Under the proposed Final Judgment, defendants must take all

reasonable steps necessary to accomplish both divestitures quickly, and

shall cooperate with bona fide prospective purchasers by supplying all

information relevant to the proposed sale. Should defendants fail to

complete the divestitures by the specified deadlines to purchasers

approved by the United States, the proposed Final Judgment provides for

the appointment by the Court of a trustee or trustees to accomplish

either or both of the divestitures. Section VI relates to the selection

and appointment of a trustee to sell the drilling fluid business, and

section VII relates to the selection and appointment of a trustee to

sell Baroid's diamond bit business. Following the trustee's

appointment, only to trustee will have the right to sell the assets to

be divested, and defendants will be required to pay for all of the

trustee's sale-related expenses. Should the trustee not accomplish the

divestiture it is empowered to make within six months of appointment,

the trustee and the parties will make recommendations to the Court,

which shall enter such orders as it deems appropriate to carry out the

purpose of the trust, which may include extending the trust or the term

of the trustee's appointment. If a trustee is appointed to sell

Baroid's diamond bit business, that business will include a license to

manufacture and sell Baroid's steel-bodied diamond bits anywhere in the

world, including The People's Republic of China.

Section VIII of the proposed Final Judgment requires that the

defendants or the trustee, whoever is responsible for accomplishing the

divestiture at the time, notify the United States when a binding

contract has been entered so that the United States has an opportunity

to evaluate the purchaser. This section gives the United States the

right to obtain information about the perspective purchaser. Absent

written notice that the United States does not object to the proposed

purchaser of the drilling fluid business, a divestiture of that

business under section IV cannot be consummated. Upon the United

States' objection to the purchaser of Baroid's diamond bit business

under section V, the transaction cannot be consummated. Should the

United States object to a sale of either business by the trustee, the

divestiture cannot be consummated unless approved by the Court.

Section IX of the proposed Final Judgment requires defendants to

submit monthly reports to the United States regarding its efforts to

divest the drilling fluid business and Baroid's diamond bit business,

including the status of discussions or negotiations with any person.

Section X states that defendants may finance part of all of either

divestiture with the prior consent of the United States. Under section

XI of the proposed Final Judgment, defendants must take certain steps

to ensure that, until the required divestiture has been completed,

Baroid Drilling and DBS will be held separate and apart from Dresser

and that both businesses, as well as

M-I, will be maintained as viable competitors.

The proposed Final Judgment also contains provisions designed to

ensure that the purchaser of Baroid's diamond bit business will have

the opportunity to hire a work force sufficient to maintain that

business as an effective competitor in the United States. Under section

XII of the proposed Final Judgment, defendants are required to

encourage and facilitate employment by the purchaser of all Baroid

employees in the United States, the preponderance of whose duties

relate to Baroid's diamond bit business, and will be prohibited from

employing these individuals for one year after the divestiture unless

those individuals are terminated or not hired by the purchaser. In

addition, defendants are required to assist the purchaser so that the

purchaser may determine if it would like to hire other Baroid sales,

marketing and research and development employees, the preponderance or

whose duties do not relate to Baroid's diamond drill bit business. This

assistance consists of providing information and consultation regarding

the employees' relative job duties and performance.

Finally, section XV provides that the proposed Final Judgment will

expire on the tenth anniversary of its entry by the Court.

IV

Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act (15 U.S.C. 15) provides that any

person who has just been injured as a result of conduct prohibited by

the antitrust laws may bring suit in federal court to recover three

times the damages the person has suffered, as well as costs and

reasonable attorneys' fees. Entry of the proposed Final Judgment will

neither impair nor assist the bringing of any private antitrust damage

action. Under the provisions of section 5(a) of the Clayton Act (15

U.S.C. 16(a)), the proposed Final Judgment has no prima facie effect in

any subsequent private lawsuit that may be brought against defendants.

V

Procedure Available for Modification of the Proposed Final Judgment

The United States and defendants have stipulated that the proposed

Final Judgment may be entered by the Court after compliance with the

provisions of the APPA, provided that the United States has not

withdrawn its consent. The APPA conditions entry upon the Court's

determination that the proposed Final Judgment is in the public

interest.

The APPA provides a period of at least 60 days preceding the

effective date of the proposed Final Judgment within which any person

may submit to the United States written comments regarding the proposed

Final Judgment. Any person who wishes to comment should do so within 60

days of the date of publication of this Competitive Impact Statement in

the Federal Register. The United States will evaluate the comments,

determine whether it would withdraw its consent, and respond to

comments. The comments and the response of the United States will be

filed with the Court and published in the Federal Register.

Written comments should be submitted to: Roger W. Fones, Chief

Transportation, Energy & Agriculture Section, Antitrust Division,

Judiciary Center Building, 555 4th Street, NW., room 9104, Washington,

DC 20001.

VI

Alternatives to the Proposed Final Judgment

The proposed Final Judgment requires that either Dresser's interest

in M-I or Baroid Drilling, and Baroid's diamond bit business be sold to

a purchaser or purchasers that would use the respective businesses

promptly to become viable competitors in both of the product markets

alleged in the Complaint. Thus, compliance with the proposed Final

Judgment and the completion of the divestitures required by the

Judgment would resolve the competitive concerns raised by the proposed

transaction, and assure that the respective businesses would remain

independent and active competitors to Dresser's drilling fluid and

diamond bit businesses in the United States.

Litigation is, of course, always an alternative to a consent decree

in a section 7 case. The United States rejected this alternative

because the divestitures required under the proposed Final Judgment

should prevent the merger of Dresser and Baroid from having a

significant anticompetitive effect in either of the two relevant

product markets alleged, and will provide substantially all of the

relief requested in the Complaint. The United States believes that in

the hands of appropriate purchasers, the drilling fluid business that

is divested and Baroid's diamond bit business will likely maintain

their respective competitive roles in the United States.

The United States is satisfied that the proposed Final Judgment

fully resolves the anticompetitive effects of the proposed merger

alleged in the Complaint. Although the proposed Final Judgment may not

be entered until the criteria established by the APPA (115 U.S.C. 15

(b)-(h)) have been satisfied, the public will benefit immediately from

the safeguards in the proposed Final Judgment because the defendants

have stipulated to comply with the terms of the Judgment pending its

entry by the Court.

VII

Determinative Materials and Documents

There are no materials or documents that the United States

considered to be determinative in formulating this proposed Final

Judgment. Accordingly, none are being filed with this Competitive

Impact Statement.

Dated: December 23, 1993.

Respectfully submitted,

Angela L. Hughes,

Denise L. Diaz,

Attorneys, U.S. Department of Justice, Antitrust Division, Judiciary

Center Building, room 9104, 555 Fourth Street NW., Washington, DC

20001, (202) 307-6410.

[FR Doc. 94-1038 Filed 1-14-94; 8:45 am]

BILLING CODE 4410-01-M