Merger Highlights

November 4, 2017

FTC Remains Mindful of Minority Interests in Merger Review

On November 3, 2017, the FTC announced that Red Ventures and Bankrate agreed to a divestiture of Bankrate’s Caring.com business unit to settle FTC charges that their $1.4 billion merger would likely harm competition in the market for third-party paid referral service for senior living facilities.

According to the FTC’s complaint, Red Ventures was not itself present in that market. Nevertheless, the FTC was concerned that two of Red Ventures’ largest private equity shareholders: Silverlake Partners and General Atlantic jointly own A Place for Mom.com, which allegedly competes with Bankrate’s Caring.com, which competes in the market for third-party paid senior living facilities referral services. A Place for Mom.com, the largest provider of such services, and Caring.com is the second largest provider. In addition to their 34% equity interest in Red Ventures, General Atlantic and Silver Lake Partners have two of the seven seats on Red Ventures’ board, approval rights over two other seats and approval rights over significant capital expenditures.

According to the complaint, a Place for Mom.com and Caring.com are each other’s closest competitors, competing for national and local business. Other competitors in the U.S. market for third-party paid referral services for senior living facilities comprise a much smaller fringe. The complaint alleges that the two Red Venture shareholders have the collective ability to significantly influence management of Red Venture and Caring.com. Thus, if consummated, the transaction may increase the chance for Red Ventures to unilaterally exercise market power and the potential for coordinated interaction between Caring.com and A Place for Mom.

October 1, 2017

FTC Settles With Integra on its Acquisition of J&J’s Codman Neuro Division

by Doyle, Barlow & Mazard PLLC

On September 27, 2017, the FTC announced that Integra LifeSciences Holdings Corp. (“Integra”) and Johnson & Johnson (“J&J”) agreed to a divestiture of five neurosurgical medical device product lines to settle FTC allegations that Integra’s proposed $1 billion acquisition of J&J’s Codman Neuro division (“Codman”) would negatively impact competition in those markets.

Competitive Issue

Both companies supply a range of devices used in operative neurosurgery, hydrocephalus management and neuro-critical care. According to the FTC’s complaint, the acquisition as it was proposed would likely harm competition in the U.S. markets for (1) intracranial pressure monitoring systems, where Integra and Codman are the only significant suppliers of these systems, together accounting for 94% of the U.S. market; (2) cerebrospinal fluid collection systems, where Integra and Codman are two of the only three competitively significant suppliers of these collection systems in the United States, together accounting for 71% of the market; (3) non-antimicrobial external ventricular drainage catheters, where Integra and Codman are two of the only three competitively significant suppliers of these catheters in the United States, together accounting for 46% of the market; (4) fixed pressure valve shunt systems, where Integra and Codman are two of the only three competitively significant suppliers of these catheters, accounting for a combined 38% of the U.S. market; and (5) dural grafts, where Integra and Codman together control 75% of the U.S. market.

September 28, 2017

DOJ Protects U.S. Electric Arc Furnace Mill Operators

by Doyle, Barlow & Mazard PLLC

On September 27, 2017, the DOJ announced Showa Denko K.K. (“SDK”) will be required to divest SGL Carbon SE’s (“SGL”) entire U.S. graphite electrodes business in order for SDK to proceed with its proposed $264.5 million acquisition of SGL’s global graphite electrodes business.

According to the DOJ’s complaint, SDK and SGL manufacture and sell large ultra-high power (UHP) graphite electrodes that are used to generate sufficient heat to melt scrap metal in electric arc furnaces. The complaint alleges that SDK and SGL are two of the three leading suppliers of large UHP graphite electrodes to U.S. electric arc furnace steel mills, and that the two firms together have a combined market share of about 56%. The third domestic player has a 22% market share. While the rest of the market share (22%) is held by a number of importers, the DOJ alleged that none of the importers could individually or collectively are in a position to constrain a unilateral exercise of market power.

In the United States, individual EAF customers solicit bids from three domestic producers of large UHP graphite electrodes, and these producers develop individualized bids based on each customer’s Request

September 27, 2017

Does Avoiding a Second Request Mean that Your Deal Is Approved?

by Doyle, Barlow & Mazard PLLC

The answer is No. The fact that your deal avoided a second request investigation does not mean that you are in the clear if your deal substantially lessens competition in a relevant antitrust market.

The Department of Justice’s Antitrust Division (“DOJ”) and Federal Trade Commission (“FTC”) have for years emphasized that they will investigate and challenge consummated transactions that were not initially reviewed or slipped through the cracks if those transactions substantially lessen competition. It does not matter that for one reason or another that merging parties were able to successfully avoid a long drawn out investigation. The DOJ’s lawsuit to block Parker’Hannifin’s acquisition of CLARCOR, Inc. illustrates that the DOJ may open an investigation and challenge a transaction even after it allowed the Hart-Scott Rodino (“HSR”) waiting period to expire. The enforcement action also serves as a reminder that if merging parties do not cooperate with a merger investigation, they risk being sued.

DOJ Sues Parker-Hannifin Seven Months After Allowing it to Close its Acquisition of CLARCOR

September 20, 2017

FTC Cleared Valero Deal But California State AG Successfully Challenged It

by Doyle, Barlow & Mazard PLLC

On September 19, 2017, Valero Corporation (“Valero”) abandoned its acquisition of two northern California bulk petroleum terminals from Plains All American Pipeline (“Plains”) after the California state attorney general filed a lawsuit in the Northern District of California against Valero’s proposed acquisition. The lawsuit was filed on July 8, 2017, a day after the FTC decided not to take any action against the transaction.

Background of Case

Valero is a refiner and retailer of gas in California and through the acquisition, it was seeking to add Plain’s storage and distribution terminals in Richmond and Martinez, California. California alleged that the transaction would allow Valero to control the last independently operated gathering line in the state with available capacity. Part of the state’s argument was that the acquisition would eliminate Plains as a maverick competitor. California alleged that Valero’s acquisition would permit the vertically integrated refiner to reduce competitor access to the distribution terminals, which would result in increased fuel prices at retail gas stations. California alleged that Valero would be able to recoup lost terminal profits (after withholding access from competitors) through a downstream increase in gas prices. California also alleged that once all the fuel terminals were vertically integrated, there would be a higher risk of coordination among Valero and other vertically integrated providers to similarly reduce supply into the terminal and increase prices at gas stations.

September 1, 2017

FTC Clears Animal Hospital Deal With Divestitures

by Doyle, Barlow & Mazard PLLC

On August 30, 2017, the Federal Trade Commission (“FTC”) announced that Mars, Incorporated (“Mars”) agreed to divest 12 specialty or off-hours emergency animal hospitals around the United States to settle FTC allegations that Mars’s $9.1 billion acquisition of pet care company VCA Inc. (“VCA”) would violate federal antitrust laws.

Competition Problem

The animal hospital industry is highly fragmented and very crowded. For the most part, the FTC found that there were really very few antitrust concerns with the deal so there was much in terms loss of competition. Overall, the combined entity would own roughly 6.5% of the North American market (26,000 animal hospitals) in terms of locations. While a 6% share of the national or North American space is by no means troubling, problematic overlaps could nevertheless exist in smaller local markets. Indeed, the primary factors influencing a customer’s selection of an animal hospital are convenient location and hours, personal recommendations, reasonable fees and quality of care.

August 27, 2017

FTC Clears Amazon’s Acquisition of Whole Foods

by Doyle, Barlow & Mazard PLLC

On August 23, 2017, the Federal Trade Commission cleared Amazon.com Inc.’s acquisition of Whole Foods Market Inc. without a second request investigation. As mega mergers go, this antitrust review was fast and furious.

When the deal was announced, consumer groups and politicians questioned whether the combination was anticompetitive. Even President Trump, during the campaign, had been quoted as saying “Amazon had a huge antitrust problem”.

Many others were outspoken that the deal should at the very least undergo a thorough investigation because as they saw it, Amazon was adding groceries to its mix in an effort to cement its position as the go to platform where most online commerce takes place. The argument goes that Amazon is a monopolist in online retailing (46% of online retail sales) and it was acquiring Whole Foods, an organic and premium food grocery brick & mortar retailer providing Amazon with additional infrastructure that would allow Amazon to sell and deliver groceries in more cities. Indeed, AmazonFresh is available only in a handful of cities, and doesn’t have the same range of offerings as Whole Foods. Whole Foods delivers through Instacart, but not in a number of of cities. Amazon Prime offers free delivery and Instacart’s delivery fees can add up. Therefore, the deal raised both vertical (online platform along with brick & mortar stores) and horizontal (both firms competed in the retail distribution of food) issues, but combined the merged firm was still a very small retail grocer and the addition of Whole Foods tiny share of the grocery business was trivial.

June 29, 2017

FTC Blocks Small Physician Group Deal

by Doyle, Barlow & Mazard PLLC

On June 22, 2017, the Federal Trade Commission and the Attorney General of North Dakota filed a complaint to block Sanford Health’s proposed acquisition of Mid Dakota Clinic, seeking a temporary restraining order and preliminary injunction to stop the deal and to maintain the status quo pending an administrative trial on the merits of the case.

The FTC’s complaint alleges that the deal would reduce competition for adult primary care physician services, pediatric services, obstetrics and gynecology services, and general surgery physician services in the greater Bismarck and Mandan metropolitan area or four counties.

According to the complaint, Sanford and Mid Dakota are each other’s closest competitors in a four-county Bismarck-Mandan region of North Dakota, an area with a population of 125,000. The FTC’s complaint alleges that the transaction would create a group of physicians with at least 75 to 85 percent share in the provision of adult primary care physician services (59 out of 77 physicians in the area), pediatric services (10 out of 12 physicians), and obstetrics and gynecology (15 out of 17 physicians) services. Moreover, the complaint alleged that the merged firm would be the only physician group offering general surgery physician services in the relevant geographic market with a total of ten physicians. In total, the two firms would combine approximately 94 physicians in the relevant geographic market.

June 20, 2017

FTC Protects Daily Fantasy Sports Customers By Challenging The Merger of DraftKings and FanDuel

by Doyle, Barlow & Mazard PLLC

On June 19, 2017, the Trump Administration’s Federal Trade Commission (“FTC”) authorized the staff to file an antitrust complaint to block the merger of DraftKings and FanDuel, the two largest daily fantasy sports (“DFS”) sites. The state of California and the District of Columbia Attorneys General joined in the lawsuit. The FTC’s legal challenge is a huge win for DFS customers.

Merger to Monopoly Tests Trump’s Antitrust Enforcement Policy

On November 18, 2016, shortly after President Trump won the election, the two largest DFS firms announced their plans to merge into a single company that would control more than 90% of the DFS market. Regardless of the political backdrop, any merger that would result in a virtual monopoly was sure to be highly scrutinized.

April 7, 2017

EC Approves ChemChina’s Acquisition of Syngenta

by Doyle, Barlow & Mazard PLLC

On April 5, 2017, the EC approved China National Chemical Corporation’s (“ChemChina”) proposed acquisition of Syngenta AG (“Syngenta). The approval is conditional on the divestiture of significant parts of ChemChina’s European pesticide and plant growth regulator business.

Syngenta is the leading pesticide supplier worldwide. ChemChina is currently active in pesticide markets in Europe through Adama, its wholly-owned Israel-based subsidiary. Unlike Syngenta, which produces pesticides based on active ingredients it has developed itself, Adama only produces generic pesticides based on active ingredients developed by third parties for which the patent has expired. Adama is the world’s largest producer of such generic pesticides.

The EC had concerns that the transaction as notified would have reduced competition in a number of existing markets for pesticides. Furthermore, it had concerns that the transaction would reduce competition for plant growth regulators. The EC’s investigation focused on competition for existing pesticides, since ChemChina does not compete with Syngenta for the development of new and innovative pesticides.