September 01, 2017

MONTH-IN-BRIEF: Mergers & Acquisitions

Ryan Thomas, Chauncey Lane

Mergers & Acquisitions Law

FTC Approves Whole Foods-Amazon Merger

The Federal Trade Commission (FTC) recently announced that Amazon may proceed with its acquisition of Whole Foods for $13.7 billion. The FTC’s investigation focused on whether the merger would decrease competition under Section 7 of the Clayton Act, or would constitute an unfair method of competition under Section 5 of the FTC Act. Section 7 of the Clayton Act prohibits mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly.” Section 5 of the FTC Act provides that “unfair or deceptive acts or practices in or affecting commerce . . . are . . . declared unlawful.” On August 23, 2017, Bruce Hoffman, the Acting Director of the FTC’s Bureau of Competition, announced that the FTC would not undertake any further investigation of the acquisition. Amazon has said that the deal is expected to close in 2017.

Delaware Court Provides Guidance on Establishing Bad Faith

On August 17, 2017, the Delaware Court of Chancery held that the board of directors of MeadWestvaco Corporation (MeadWestvaco) did not act in bad faith in its decision to approve MeadWestvaco’s $9 billion stock-for-stock merger with Rock-Tenn Company (Rock-Tenn). In 2015, MeadWestvaco merged with Rock-Tenn to create WestRock Co. in a stock-for-stock consideration valuing MeadWestvaco at a 9.1% premium over its stock price. Plaintiffs complained that MeadWestvaco’s directors entered into the merger in bad faith in reaction to a threatened proxy contest from Starboard Value LP, a prominent shareholder-activist in a deal that undervalued MeadWestvaco and left $3 billion on the table. The court held that that the allegations did not establish bad faith, highlighting that MeadWestvaco’s board considered the merger nine months before approving it, held several meetings to consider the transaction, received various valuations, was represented by legal counsel and financial advisors, and heavily negotiated the terms of the transaction. This case represents the extremely high bar to potential liability of disinterested directors of a target company.

International Law

European Commission Announces Investigation of Bayer-Monsanto Acquisition

On August 22, 2017, the European Commission announced an in-depth investigation of Bayer’s $66 billion takeover of Monsanto, a U.S. company headquartered in St. Louis, Missouri, citing concerns about reduced competition in various pesticide and seeds markets resulting in “higher prices, lower quality, less choice and less innovation.” Although Bayer announced a potential acquisition of Monsanto in late 2016, it did not seek approval from European authorities until June 2017. In a letter to the public, Margrethe Vetager, the commissioner in charge of European competition policy, stated that the European Commission had receive more than 50,000 emails and more than 5,000 letters and postcards expressing concerns about the potential negative effects of Monsanto and Bayer products resulting from this transaction. In its agreement with Monsanto, Bayer, a German company, agreed to divest businesses with up to $1.6 billion in annual sales if required by antitrust regulators. The European Commission has until January 8, 2018, to make its decision regarding this acquisition.

Ryan Thomas

Counsel, Bass Berry & Sims PLC

As mergers and acquisitions (M&A) and securities counsel to numerous national companies and private equity firms, Ryan Thomas has closed more than $50 billion in M&A transactions, and more than $60 billion in overall transactions, including both the largest domestic LBO, and the largest private equity-backed IPO at the time. Ryan’s practice focuses on public and private companies within the healthcare, media, retail, government services, life sciences and technology industries, among others.

Chauncey Lane

Counsel; Husch Blackwell, LLP

Boards and senior executives of public and private companies and investment management firms call on Chauncey for his knowledge and experience in mergers and acquisitions and capital market transactions. In this role, Chauncey regularly assists domestic and international clients with buy-side and sell-side mergers, divestitures, asset acquisitions, going-private transactions, debt and equity offerings, corporate governance and corporate restructurings. Chauncey is an active member of the Business Law Section’s Mergers and Acquisitions Committee and Federal Regulation of Securities Committee.