January 21, 2020
Post Holdings, Inc. announced that it was abandoning its acquisition of the private label cereal business of TreeHouse Foods, Inc. The chronology of the now-defunct deal is interesting and unusual, and as a result, parties to a deal that could raise competitive issues should have a strategy and be prepared in advance to address a government challenge based on potential competitive issues. This alert discusses what businesses need to know.
On January 13, 2020, Post Holdings, Inc. (Post) announced that it was abandoning its acquisition of the private label cereal business of TreeHouse Foods, Inc. (TreeHouse). The chronology of the now-defunct deal is interesting and unusual:
The substance of the FTC’s complaint—alleging that the deal would further limit competition in an already concentrated market—appears to be fairly typical. However, it is unusual for the FTC to challenge a deal after it clears the HSR process without objection or a request for additional information. Such a challenge is even more unusual after early termination is granted, as occurred in this case.
The HSR Act was designed in part to give the government an opportunity to review, and potentially challenge, proposed deals before consummation, and early termination is typically only granted when a deal does not raise any antitrust concerns. Indeed, the FTC’s website states that “a request for ‘early termination’ will be granted only after compliance with the rules and if both the [FTC] and Department of Justice Antitrust Division have completed their review and determined they will not take any enforcement action during the waiting period.”
Nevertheless, the experience of Post and TreeHouse provides a reminder that the expiration of the HSR waiting period, or a grant of early termination, does not constitute government “approval” of a deal. After HSR clearance, parties to a deal are free to proceed with the closing without violating the HSR Act, and HSR clearance will typically be sufficient to give parties comfort that their deal will not be challenged by the government. But transactions may still be, and occasionally are, challenged by the government after HSR clearance (even after closing).
As a result, parties to a deal that could raise competitive issues should have a strategy and be prepared in advance to address a government challenge based on potential competitive issues, even if the deal clears the HSR waiting period or is granted early termination.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
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