After a year of negotiations, the US Federal Trade Commission (FTC) has finally approved a new deal that allays anti-competitive fears over the proposed acquisition of Goodman Fielder subsidiary Leiner Davis Gelatin by German gelatine giant DGF Stoess. The Australian food company Goodman Fielder is set to sell its gelatine business to the world's largest producer of gelatine for $112.5 million (€128.6m).
From the outset, in early 2001, the FTC was concerned that the proposed transaction between the two companies would eliminate competition because the two firms combined would account for more than 50 per cent of the US market for pigskin and beef hide gelatine.
Since this time, lawyers and company personnel have been working behind the scenes to come up with a proposition to satisfy the FTC.
"The consent agreement allows the parties to complete a modified version of their transaction… to maintain the current level of competition in the US market for pigskin and beef hide gelatine," said FTC Bureau of Competition director Joseph J. Simons.
Leiner Davis Gelatin, the second-largest producer of beef hide and pigskin gelatine in the world and a subsidiary of Australian food company Goodman Fielder, operates eight gelatine manufacturing plants around the world, with one plant located in the United States.
DGF Stoess, headquartered in Eberbach, Germany, produces gelatine at eight manufacturing plants around the world, two of which are located in the United States.
Under the terms of the proposed settlement, DGF Stoess would not acquire Goodman Fielder's entire gelatine business; rather, Leiner Davis would retain its United States and Argentine gelatine plants and all of the infrastructure, assets, and personnel related to those plants.
In addition, to protect against any anti-competitive effects resulting from a possible, and very likely, decision by Goodman Fielder to exit the gelatine business, the proposed settlement requires Goodman Fielder to obtain prior approval from the Commission if it later decides to divest its retained assets.
"Leiner Davis retains all of the necessary assets, including two plants, personnel, and infrastructure, to maintain the current level of competition in the US market for pigskin and beef hide gelatine," said Simons.
Fears that Goodman Fielder might later be tempted to sell the retained assets to either DGF Stoess or SKW, the third-leading supplier worldwide of pigskin and beef hide gelatine, were also anticipated.
"The proposed consent agreement prohibits DGF Stoess from acquiring Leiner Davis's US and/or Argentine gelatine assets without prior approval from the FTC. [Goodman Fielder] may not sell any of the retained gelatine assets to SKW without prior approval,"the FTC said in a statement this week.
In order to cover all eventualities, the FTC warned that were Goodman Fielder to split the assets and sell one plant to one buyer and the other plant to another buyer, it would have to obtain prior approval from the FTC.
But it's a waiting game. Champagne will only be popped after 8 April, the end of a public comment period and the date for a final Commission decision.