The key to closing transactions that raise straightforward antitrust concerns in a relatively short time frame is the antitrust counsel’s and the merging parties’ ability to effectively cooperate with the Antitrust Division staff tasked with reviewing the transaction.
A. Martin Marietta/Texas Industries
On June 26, 2014, the Antitrust Division approved Martin Marietta Materials, Inc.’s $2.7 billion acquisition of Texas Industries on the condition that Martin Marietta divest a quarry in Oklahoma and two Texas rail yards used by it to distribute aggregate in the Dallas area.
The transaction was announced on January 28, 2014 and the investigation along with a settlement agreement was completed within five months. Because the Antitrust Division had a wealth of experience investigating mergers of firms that produce aggregates and the parties were cooperative in terms of providing information and a solution to remedy the competitive harms, the Antitrust Division was able to complete the investigation quickly. Indeed, the parties’ Merger Agreement included language regarding divestiture of one of the overlapping quarries located in Mill Creek, Oklahoma and up to two of the related rail yards located in Dallas, Texas. In other words, Martin Marietta and Texas Industries were already prepared to part with a quarry in Mill Creek, Oklahoma, and two rail yards in Dallas, Texas.
The DOJ alleged that production and sale of aggregates is a relevant market. Aggregate is used in a variety of applications, such as road construction, and for the production of ready mix concrete and asphalt. The DOJ also alleged that the proposed transaction would have likely resulted in increased prices for customers in Mill Creek, Oklahoma and in Dallas, Texas. To resolve the Antitrust Division’s concerns, Martin Marietta agreed to divest its North Troy aggregate quarry in Mill Creek, Oklahoma, its rail yard in Dallas, and its rail yard in Frisco, Texas.
B. Landmark Aviation/Ross Aviation
On July 30, 2014, the DOJ approved Landmark’s acquisition of Ross with conditions. Each provided fixed base operator assets used to provide flight support services to general aviation customers. The transaction involved one overlap, at the Scottsdale Arizona Municipal Airport, where the parties were the only providers of such services. Early in the initial Hart-Scott-Rodino (“HSR”) waiting period, the parties offered to divest Ross’s relevant assets in Scottsdale and identified a buyer. The complaint and settlement agreement were filed within 60 days of the HSR filing. The transaction closed within three months of executing the merger agreement.
C. Tyson Foods Inc./Hillshire Brands Co.:
On August 27, 2014, the DOJ approved Tyson Foods’ acquisition of Hillshire Brands with conditions. The transaction was announced on July 1, 2014 and the Antitrust Division issued a second request related to monopsony concerns. On August 12, 2014, narrowly tailored second requests were issued to Tyson Foods and Hillshire Brands related to a small portion of the overall business. According to the DOJ, the merger would have combined companies accounting for more than a third of all sow purchases from U.S. farmers. To resolve the monopsony concerns, Tyson quickly agreed to divest its sow purchasing business and the parties were not required to comply with the second requests. The complaint and accompanying settlement agreement were filed within 60 days of announcement of the deal.
The DOJ’s second request investigation into Martin Marietta’s proposed acquisition of Texas Industries; Landmark Aviation’s proposed acquisition of Ross Aviation; and Tyson Foods’ acquisition of Hillshire Brands are illustrative of how merging parties can obtain approval of a transaction with conditions in a relatively short period of time. Given the trajectory of past merger investigations involving firms’ with overlapping aggregates businesses, the DOJ had the experience to complete the investigation quickly. In each transaction, the horizontal issues presented by the combinations were limited to either one product overlaps or an overlap in two geographic areas so full compliance with the second request was not necessary. The DOJ focused on the specific horizontal overlaps that raised antitrust concerns. The parties, in each case, helped the staff move the case along by providing as much information as possible at the beginning of the investigation and in each case it was clear that their antitrust lawyers knew the areas that presented the most significant antitrust concerns. Indeed, the parties’ early decisions that they would divest the overlapping issues allowed them to navigate through the second request and negotiate a consent decree within two months (Landmark Aviation/Ross Aviation and Tyson Foods/Hillshire) and five months (Martin Marieta/Texas Industries) of announcement of the transaction.
These examples illustrate that closing a deal within a certain time frame can still be accomplished even if the transaction raises an antitrust concern. The key is to engage the staff early. Antitrust counsel should provide customer lists, key documents, the structure of the merging companies, and identify the potential areas/markets of concern (either provide reasons why there is no problem or remedies). If the issues are straightforward, there is no need to wait as discussions relating to remedies can begin as soon as practicable. Antitrust counsel should be prepared to identify the assets to be divested as well as suitable and willing buyers that can maintain competition with those assets. As the examples above illustrate, early and constructive discussions relating to remedies allow the Antitrust Division to complete its review and draft a consent decree that resolves those concerns within a short period of time.