Corporate & Securities Law

DOJ Conditions Approval of Cookson’s Acquisition Foseco on Divestitures

By Matthew S. Wild

March 4, 2008.  On October 11, 2007, Cookson Group plc — a U.K. company — entered into an agreement to purchase Foseco plc - a U.K. company — for about $1 billion.  Both companies manufacture isotstatically press carbon ceramic products (”CBCs”) in North America and sell them throughout the United States.  CBCs are used in the continuous casting steelmaking process.  The parties’ 2006 CBC sales in the U.S. were $75 million and $4 million, respectively.  The Antitrust Division alleged relevant product markets narrower than CBCs generally — namely, laddle shrouds and stopper rods.  The Antitrust Division alleged a relevant geographic market of North America because foreign producers are at a competitive disadvantage.  They have higher delivered costs and greater lead time.  Rather than providing market share and HHI information for each relevant market, the Antitrust Division simply alleged that post-merger the parties would have a combined market share in the laddle shrouds and stopper rods markets of 75% and the markets would have an HHI of more than 6000 with a delta of 700.   The Antitrust Division alleged high entry barriers because of the high costs of manufacturers of other CBCs to switch to the manufacture of laddle shrouds and stopper rods in response a small but significant non-transitory price increase.  Accordingly, the Antitrust Division required divestiture of the overlapping assets.  This action demonstrates the Antitrust Division’s vigilance in catching small competitive overlaps.  Foseco had only $4 million in annual sales of CBCs in North America.  Yet the Antitrust Division caught the potential competitive harm and required a remedy.  The DOJ Press Release and Competitive Impact Statement are attached.  DOJ Press Release (Cookson);Competitive Impact Statement (Cookson)

Full post as published by Antitrust Commentary on March 05, 2008 (boomark / email).