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Bates White provides advice on the merger of Holcim and Lafarge
On May 4, 2015, the Federal Trade Commission (FTC) and the Competition Bureau of Canada (CBC) both approved the proposed $25 billion merger of Holcim Ltd. and Lafarge S.A. The merger of these two global, vertically integrated building materials firms1 will create the world’s largest cement manufacturer.
Holcim and Lafarge publicly announced their planned global merger on April 7, 2014. Given the size of the proposed transaction, US and Canadian antitrust agencies scrutinized the transaction for more than a year to ensure that the merger would not harm competition or adversely affect consumers. Similarly, the European Commission and other antitrust agencies around the world reviewed the transaction for more than six months to ensure that there were no anticompetitive effects.
Bates White was engaged by the parties to analyze potential competitive effects in both the US and Canada for the three products at issue: aggregates, ready-mix concrete, and cement. The team of Bates White economists, led by Partner George A. Rozanski, analyzed likely competitive effects and provided ongoing advice throughout the regulatory approval process. Bates White undertook significant data analysis and presented econometric analyses to both the FTC and the CBC, with a focus on the effects of past entry and exit events on competitive outcomes.
Bates White also worked closely with outside counsel and executives of the merging parties to assess antitrust risks in the United States and Canada, as well as to analyze alternative divestiture scenarios.
Bates White economists used company data to conduct rigorous analyses that were submitted to the FTC and CBC. Ultimately, the team made a total of four submissions to the agencies. These analyses examined the incentive and ability of market participants, including buyers of assets that would be divested, to supply cement to the local areas of concern, taking account of cross-border flows and dynamic supply responses. Based on this work, Bates White opined that likely merger effects needed to be evaluated in the context of a dynamic analysis that took into account the possibility of supply responses by competitors, rather than being focused on current patterns of supply and static measures of concentration.
Bates White made one presentation to the CBC on the competitive effects analysis and two presentations to the FTC on the impact of entry and exit events on margins and prices for two of the products at issue, cement and ready-mix concrete. In addition, Bates White advised the parties on their second request responses to the FTC and responses to requests for information by the CBC. The agencies announced their approval of the merger in May and June of 2015, conditional on Holcim’s and Lafarge’s divestitures of a small number of plants, terminals, and a quarry.
The Bates White team included George Rozanski, Donald Stockdale, Scott Thompson, Pauline Kennedy, and Brian McClelland. Throughout the regulatory approval process, Bates White worked closely with attorneys from the law firms of Cleary Gottlieb Steen & Hamilton (counsel for Lafarge US); McCarthy Tétrault (counsel for Lafarge Canada); Simpson Thacher & Bartlett (counsel for Holcim US); and Blake, Cassels & Graydon (counsel for Holcim Canada).
1Holcim and Lafarge are both vertically integrated in (1) aggregates (i.e., sand, stone, and crushed rock); (2) cement; (3) ready-mix concrete; (4) asphalt and paving; and (5) building construction services.