Antitrust Lawyer Blog Commentary on Current Developments

NORTH AMERICAN DIVESTITURE ORDERED IN OWENS CORNING

On October 26, 2007 the Federal Trade Commission (“FTC”) entered into a settlement agreement with Owens Corning regarding its proposed acquisition of the glass fiber reinforcements and composite fabric assets of Compagnie de Saint Gobain (Saint Gobain).

The complaint accompanying the consent agreement asserts that the deal reduces competition in the North American market for continuous filament mat (“CFM”) products. Under the terms of the consent order that would resolve the Commission’s charges and allow the deal to proceed, Owens Corning must divest its North American CFM to AGY Holding Company within 10 days of completing its acquisition of the Saint Gobain assets.
Originally, the plan was to combine Owens Corning and Saint Gobain’s respective glass fiber reinforcement businesses into a new entity called Owens Corning Vetrotex Reinforcements. However, antitrust concerns forced the companies to restructure the deal and enter into an agreement in which Owens Corning acquires Saint Gobain’s glass fiber reinforcements and composite fabric business assets worldwide, with several important exclusions. First, Owens Corning will not acquire Saint Gobain’s glass fiber reinforcement assets in the United States. Next, certain assets in Europe will be divested under an agreement between the parties and the European Commission (EC). Owens Corning will still acquire Saint Gobain’s CFM assets, including the CFM production facility in Besana, Italy.

A unique glass fiber reinforcement product, CFM is an input in the production of non-electrical laminate, marine parts and accessories, and other products where its strength and durability make it the most cost-effective material to use. CFM increases the mechanical performance of products, as well as their resistance to chemicals.

According to the Commission’s complaint, Owens Corning’s acquisition of the Saint Gobain glass fiber reinforcements and composite fabric assets would substantially lessen competition in the North American market for the development, manufacture, and sale of CFM and related technology. The FTC contends that the market for CFM is highly concentrated and that for many years Owens Corning and Saint Gobain have been the primary competitors in the CFM market, with the two companies accounting for more than 90 percent of the CFM sold in North America.

The order requires Owens Corning to divest its Huntingdon CFM facility to AGY and to divest the Marbles Furnace located in Anderson, South Carolina, which currently supplies the Huntingdon facility with glass fiber marbles used in the production of CFM. Further, Owens Corning is required to grant AGY two licenses, one is for intellectual property related to the production, marketing, and distribution of CFM, and the second to the furnace technology used in Owens Corning’s Guelph and Battice facilities related to CFM. The goal is to provide AGY with the assets and know-how needed to produce and sell CFM products.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com