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May25
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The Federal Reserve has approved a plan by Spanish bank, Banco Santander Central Hispano S.A. to buy approximately 25% of Sovereign Bancorp., which owns Sovereign Bank and Independence Community Bank. Independence Community Bank is based in New York. In approving the deal, the agency noted that the transaction "would not result in any significantly adverse effect on competition or the concentration of banking resources in the New York banking market or in any other relevant banking market."
In other news, JDA Software and Manugistics announced that they have been granted early termination of the HSR waiting period. The transaction must be approved by Manugistics shareholders.
Finally, funeral-services companies, Service Corporation International and Alderwoods Group, Inc., announced that the FTC has sent them each a Request for Additional Information a/k/a a Second Request. Canada's Competition Bureau also is investigating the transaction.
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May25
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The Italian antitrust watchdog will investigate Alitalia SpA's acquisition of Volare, a low-cost airline in Italy. The agency is concerned that the deal "could constitute or strengthen a dominant position in some air transport markets." According to this Forbes article,...
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May24
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Oshkosh Truck Corporation has lost yet another court battle in connection with its bid to acquire Stewart & Stevenson Services, Inc., a defense contractor. Concluding that a deal with Oshkosh would raise significant antitrust concerns, Stewart & Stevenson decided to merge with Armor Holdings Inc. instead.
Not content to let this one go, Oshkosh filed suit in federal court. It argued that Stewart & Stevenson's management "failed to uphold their responsibilities to shareholders" by rejecting Oshkosh's higher bid in favor of Armor's competing offer. A federal judge dismissed the case.
Oshkosh decided to try its luck in Texas state court. It lost--again. Acccording to a press release issued by Stewart & Stevenson, the court denied Oshkosh's request for a temporary restraining order to postpone Stewart & Stevenson's special shareholder meeting. At the shareholder meeting, which proceeds tomorrow, shareholders will vote on Stewart & Stevenson's cash merger with Armor Holdings.
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May23
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It sure looks that way. According to the AP's Euronext Holders Give Boost to NYSE Bid, "shareholders of European stock-exchange operator Euronext rejected a proposal Tuesday to commit in principle to a takeover by Deutsche Boerse Group, giving a boost to a rival bid from the New York Stock Exchange."
Euronext operates the Paris, Brussels, Amsterdam, and Lisbon stock exchanges. NYSE bid 7.8 billion euros or $10.2 billion for Euronext; Deutsche Boerse Group, which operates a German stock exchange, bid approximately 8.2 billion euros or $11 billion. Though smaller, Euronext shareholders might find NYSE's bid more attractive because it includes more cash and would require the combined entity to carry less debt.
Euronext's boards recommended the NYSE bid to shareholders. Antitrust concerns may be playing a role here. If Euronext merges with Deutsche Boerse, the deal "would create a single market covering much of Europe." Such a deal likely would receive intense scrutiny from Europe's top antitrust authority whereas a deal between Euronext and NYSE likely would sail right through the regulatory process.
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Increasingly, we're seeing overseas antitrust authorities stepping up their merger enforcement efforts. Take Poland, for instance. The Polish Anti-Monopoly refused to approve a deal between two producers of flavored vodka. The agency declined to approve the deal after concluding that the combined entity's market share would exceed 52%, 12% higher than the 40% threshold generally used by the agency when approving mergers.
Refusing to give up, the parties have decided to fight. According to this press release, Central European Distribution Corporation has filed an appeal with the Polish Anti-Monopoly office. The company disputes the agency's findings with respect to market share, although its press release notes that it is the "largest vodka producer in Poland by value."
We'll have to wait and see how this one plays out, but acquisitive companies can learn something from this dispute. The most obvious lesson--the FTC, DOJ, and EU are not the only game in town when it comes to merger enforcement. The other lesson--plan for the worst. In an environment in which any one of dozens of antitrust agencies around the world can challenge a merger, companies must plan for all contingencies including the possibility of a merger challenge from a country that only recently established an antitrust regime.
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May22
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The Delaware Corporate and Commercial Litigation Blog has an interesting post on a recent opinion issued by the Delware Chancery Court. The case involves a "squeeze-out merger of a closely-held private company."
The opinion in Delaware Open MRI Radiology Associates, P.A. v. Kessler, which is 86 pages long, addresses "whether the minority stockholders of Delaware Open MRI Radiology Associates, P.A. (“Delaware Radiology”) received fair value in a squeeze-out merger with an acquisition vehicle of the majority stockholders, Delaware Open Acquisition, P.A. (“Delaware Acquisition”)." The court concluded that the merger price was not fair, finding that the merger price was less than half of what it should have been.
As Francis G.X. Pileggi explains, the opinion "is a veritable reference text for the analysis of fair price and valuation of closely-held businesses." Also significant is that the court rejected the testimony of the both parties' valuation experts, choosing instead to use "its own independent valuation determination." Read both the opinion and Francis' take on it to learn more.
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May19
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The FTC announced the grant of a petition from DaVita Inc. requesting approval of a proposed divestiture related to its acquisition of Gambro Healthcare. The FTC challenged this acquisition in the renal dialysis industry, requiring DaVita to divest 69 renal dialysis clinics.
The agency also announced its decision to grant a petition from The Cypress Group relating to a 2001 consent order concerning the Nestle Holdings, Inc./Ralston Purina Company. Cypress sought permission to sell The Meow Mix Company to the Del Monte Corporation.
In other merger-related news, a bankruptcy judge has approved Winn-Dixie's proposed sale of 17 supermarkets in an auction . . . NYSE is facing some competition from Deutsche Boerse for Euronext, which operates a European exchange. Sources say talks between NYSE and Euronext are "far advanced" so we'll have to see how this one plays out . . . The EU has approved a deal that would allow Italy's Lottomatica to acquire U.S. lottery firm, GTech.
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May18
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In a paper available at the Social Science Research Network, Professor Lawrence J. White of the New York University's Stern School of Business discusses the Merger Guidelines. In Horizontal Merger Antitrust Enforcement: Some Historical Perspectives, Some Current Observations, Professor White suggests that studies should be conducted to determine "whether current antitrust enforcement is too strict or too lenient with respect to mergers."
Professor White begins by describing the "historical context in which the Guidelines were developed." He suggests that the Guidelines' focus on "seller concentration" is appropriate, focusing on certain studies that, although worthy of some criticism, deserve "some weight."
According to Professor White, these "studies do not provide us with general guidance as to where antitrust enforcement should bite and thus whether current enforcement practice is generally too lenient or strict." He suggests "two lines of research that potentially could provide such guidance:" "studies of post-merger pricing in the markets of the mergers that were allowed to proceed" and a "'meta analysis' of all of the extant price-concentration studies."
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May17
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The FTC announced that a conference held by the International Competition Network has ended with the release of a Merger Guidelines Workbook. The Workbook focuses on the competitive analysis of mergers. It is designed "to be a user-friendly, practical manual to help assess mergers by posing key questions the investigating authority will wish to address when considering a merger's potential effect on competition." The Workbook:
- defines and discusses some of the key concepts used in the competition assessment of mergers;
- considers the different types of mergers that may arise;
- provides worksheets that offer detailed guidance on how to examine the different elements of merger assessment;
- provides a link to an OECD glossary of industrial organization economics and competition law, suggestions for further sources, including ICN-related material, and links to the case studies used to illustrate the different elements of merger assessment; and
- contains additional case studies grouped by topic.
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