[Federal Register Volume 61, Number 14 (Monday, January 22, 1996)]
[Notices]
[Pages 1573-1580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-788]
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FEDERAL TRADE COMMISSION
[File No. 961 0017]
Praxair, Inc.; Proposed Consent Agreement With Analysis to Aid
Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: This Consent Agreement, accepted subject to final Commission
approval, settles alleged violations of federal law prohibiting unfair
or deceptive acts and practices and unfair methods of competition
arising from the acquisition of CBI Industries, Inc. by Praxair, Inc.
Under the terms of the proposed order contained in the Consent
Agreement, Praxair, among other things, must divest all of the assets
and businesses relating to four CBI plants that produce atmospheric
gases--located in Vacaville, California; Irwindale, California; Bozrah,
Connecticut; and Madison, Wisconsin--to an acquirer or acquirers
approved by the Commission. If Praxair fails to divest these assets
within 12 months after the order becomes final, a trustee may be
appointed to divest the four plants. The Consent Agreement also
requires Praxair to take all steps necessary to ensure that the plants
to be divested continue as ongoing, viable and competitive operations,
by complying with an Agreement to Hold Separate.
DATES: Comments must be received on or before March 22, 1996.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT: James H. Holden, Jr., FTC/S-2023,
Washington, D.C. 20580 (202) 326-2682; or Christina Perez, FTC/S-2214,
Washington, D.C. 20580 (202) 326-2682.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. Public comment is invited. Such
comments or views will be considered by the Commission and will be
available for inspection and copying at its principal office in
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of
Practice (16 CFR 4.9(b)(6)(ii)).
[[Page 1574]]
The Federal Trade Commission (``Commission''), having initiated an
investigation of the proposed acquisition by Praxair, Inc.
(``Praxair'') of CBI Industries, Inc. (``CBI''), and it now appearing
that Praxair, hereinafter sometimes referred to as ``Proposed
Respondent,'' is willing to enter into an agreement containing an order
to divest assets, and providing for certain other relief:
It is hereby agreed by and between Proposed Respondent Praxair, by
its duly authorized officers and attorneys, and counsel for the
Commission that:
1. Proposed Respondent Praxair is a corporation organized,
existing, and doing business under and by virtue of the laws of the
state of Delaware with its principal executive offices located at 39
Old Ridgebury Road, Danbury, Connecticut 06810-5113.
2. Proposed Respondent admits all the jurisdictional facts set
forth in the draft of complaint here attached.
3. Proposed Respondent waives:
a. any further procedural steps;
b. the requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
c. all rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement;
and
d. any claims under the Equal Access to Justice Act.
4. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this agreement and so notify the Proposed Respondent, in which event
it will take such action as it may consider appropriate, or issue and
serve its complaint (in such form as the circumstances may require) and
decision, in disposition of the proceeding.
5.This agreement is for settlement purposes only and does not
constitute an admission by Proposed Respondent that the law has been
violated as alleged in the draft of complaint here attached, or that
the facts as alleged in the draft complaint, other than jurisdictional
facts, are true.
6. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Section 2.34 of the
Commission's Rules, the Commission may, without further notice to
Proposed Respondent, (1) issue its complaint corresponding in form and
substance with the draft of complaint here attached and its decision
containing the following order to divest in disposition of the
proceeding, and (2) make information public with respect thereto. When
so entered, the order shall have the same force and effect and may be
altered, modified, or set aside in the same manner and within the same
time provided by statute for other orders. The order shall become final
upon service. Delivery by the U.S. Postal Service of the complaint and
decision containing the agreed-to order to Proposed Respondent shall
constitute service. Proposed Respondent waives any right it may have to
any other manner of service. The complaint may be used in construing
the terms of the order, and no agreement, understanding,
representation, or interpretation not contained in the order or the
agreement may be used to vary or contradict the terms of the order.
7. Proposed Respondent has read the proposed complaint and order
contemplated hereby. Proposed Respondent understands that once the
order has been issued, it will be required to file one or more
compliance reports showing that it has fully complied with the order.
Proposed Respondent further understands it may be liable for civil
penalties in the amount provided by law for each violation of the order
after it becomes final. By signing this Agreement, Proposed Respondent
represents that the relief contemplated by this Agreement can be
accomplished.
Order
I
It is ordered that, as used in this order, the following
definitions shall apply:
A. ``Respondent'' or ``Praxair'' means Praxair, Inc., its
directors, officers, employees, agents and representatives,
predecessors, successors and assigns; its subsidiaries, divisions, and
groups and affiliates controlled by Praxair, Inc., and the respective
directors, officers, employees, agents, and representatives,
successors, and assigns of each.
B. ``CBI'' means CBI Industries, Inc., its directors, officers,
employees, agents and representatives, predecessors, successors and
assigns; its subsidiaries, divisions, and groups and affiliates
controlled by CBI, and the respective directors, officers, employees,
agents, and representatives, successors, and assigns of each.
C. ``Commission'' means the Federal Trade Commission.
D. ``Acquisition'' means Praxair's acquisition of issued and
outstanding common shares of CBI, pursuant to a cash tender offer dated
November 3, 1995.
E. ``Merchant Atmospheric Gases'' means oxygen, nitrogen and argon
sold in liquid form or packaged in cylinders.
F. ``Atmospheric Gases Plant'' means a facility that produces
Merchant Atmospheric Gases.
G. ``Merchant Divestiture Assets and Businesses'' means, the
Vacaville Plant, Irwindale Plant, Bozrah Plant, and Madison Plant,
whether divested individually or in some combination, including the
assets, properties, business and goodwill, tangible and intangible,
used in the manufacture and sale of merchant atmospheric gases at those
plants, including, without limitation, the following:
1. all real property interests, including rights, title and
interest in and to owned or leased property, together with all
buildings, improvements, appurtenances, licenses and permits;
2. all machinery, fixtures, equipment, vehicles, transportation
facilities, furniture, tools and other tangible personal property,
including distribution equipment and cylinders;
3. all customer lists, vendor lists, catalogs, sales promotion
literature, advertising materials, research materials, technical
information, management information systems, software, software
licenses, inventions, patents, technology, know-how, specifications,
designs, drawings, processes and quality control data;
4. rights to and in contracts, including customer, dealer,
distributor, supply and utility contracts;
5. inventory, supplies and storage capacity, including storage
vessels;
6. all rights under warranties and guarantees, express or implied;
7. all books, records, and files; and
8. all items of prepaid expense.
H. ``Vacaville Plant'' means CBI's Atmospheric Gases Plant located
in Vacaville, California, together with all associated Merchant
Divestiture Assets and Businesses.
I. ``Irwindale Plant'' means CBI's Atmospheric Gases Plant located
in Irwindale, California, together with all associated Merchant
Divestiture Assets and Businesses.
J. ``Bozrah Plant'' means CBI's Atmospheric Gases Plant located in
Bozrah, Connecticut, together with all associated Merchant Divestiture
Assets and Businesses.
[[Page 1575]]
K. ``Madison Plant'' means CBI's Atmospheric Gases Plant located in
Madison, Wisconsin, together with all associated Merchant Divestiture
Assets and Businesses.
II
It is further ordered, That:
A. Praxair shall divest, absolutely and in good faith, within
twelve (12) months of the date this order becomes final, the Merchant
Divestiture Assets and Businesses, and shall also divest such
additional ancillary CBI assets and effect such arrangements as are
necessary to assure the marketability, viability and competitiveness of
the Merchant Divestiture Assets and Businesses.
B. Praxair shall divest the Merchant Divestiture Assets and
Businesses, either individually or in some combination, only to an
acquirer or acquirers that receive the prior approval of the Commission
and only in a manner that receives the prior approval of the
Commission. The purpose of the divestiture is to ensure the
continuation of the Merchant Divestiture Assets and Businesses as an
ongoing, viable operation or operations, engaged in the same business
in which the Merchant Divestiture Assets and Businesses are engaged at
the time of the proposed divestiture, and to remedy the lessening of
competition resulting from the proposed acquisition as alleged in the
Commission's complaint.
C. Pending divestiture of the Merchant Divestiture Assets and
Businesses, Praxair shall take such actions as are necessary to
maintain the viability, marketability, and competitiveness of the
Merchant Divestiture Assets and Businesses, and to prevent the
destruction, removal, wasting, deterioration or impairment of the
Merchant Divestiture Assets and Businesses except for ordinary wear and
tear.
D. Praxair shall comply with all terms of the Agreement to Hold
Separate attached to this order and made a part hereof as Appendix I.
The Agreement to Hold Separate shall continue in effect until such time
as respondent has divested all of the Merchant Divestiture Assets and
Businesses as required by this order.
III
It is further ordered, That:
A. If Praxair has not divested, absolutely and in good faith, and
with the prior approval of the Commission, the Merchant Divestiture
Assets and Businesses within twelve (12) months of the date this order
becomes final, the Commission may appoint a trustee to divest the
Merchant Divestiture Assets and Businesses. In the event that the
Commission or the Attorney General brings an action pursuant to
Sec. 5(l) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(l), or
any other statute enforced by the Commission, Praxair shall consent to
the appointment of a trustee in such action. Neither the appointment of
a trustee nor a decision not to appoint a trustee under this Paragraph
III shall preclude the Commission or the Attorney General from seeking
civil penalties or any other relief available to it, including a court-
appointed trustee, pursuant to Sec. 5(l) of the Federal Trade
Commission Act, or any other statute enforced by the Commission, for
any failure by Praxair to comply with this order.
B. If a trustee is appointed by the Commission or a court pursuant
to Paragraph III.A., Praxair shall consent to the following terms and
conditions regarding the trustee's powers, duties, authority, and
responsibilities:
1. The Commission shall select the trustee, subject to the consent
of Praxair, which consent shall not be unreasonably withheld. The
trustee shall be a person with experience and expertise in acquisitions
and divestitures. If Praxair has not opposed, in writing, including the
reasons for opposing, the selection of any proposed trustee within ten
(10) days after notice by the staff of the Commission to Praxair of the
identity of any proposed trustee, Praxair shall be deemed to have
consented to the selection of the proposed trustee.
2. Subject to the prior approval of the Commission, the trustee
shall have the exclusive power and authority to divest the Merchant
Divestiture Assets and Businesses.
3. Within ten (10) days after appointment of the trustee, Praxair
shall execute a trust agreement that, subject to the prior approval of
the Commission and, in the case of a court-appointed trustee, of the
court, transfers to the trustee all rights and powers necessary to
permit the trustee to effect the divestiture(s) required by this order.
4. The trustee shall have twelve (12) months from the date the
Commission approves the trust agreement described in Paragraph III.B.3.
to accomplish the divestiture(s), which shall be subject to the prior
approval of the Commission. If, however, at the end of the twelve month
period, the trustee has submitted a plan of divestiture or believes
that divestiture can be achieved within a reasonable time, the
divestiture period may be extended by the Commission, or, in the case
of a court-appointed trustee, by the court; provided, however, the
Commission may extend this period only two (2) times.
5. The trustee shall have full and complete access to the
personnel, books, records and facilities related to the Merchant
Divestiture Assets and Businesses, or to any other relevant
information, as the trustee may request. Praxair shall develop such
financial or other information as the trustee may request and shall
cooperate with the trustee. Praxair shall take no action to interfere
with or impede the trustee's accomplishment of the divestiture(s). Any
delays in divestiture caused by Praxair shall extend the time for
divestiture under this Paragraph in an amount equal to the delay, as
determined by the Commission or, for a court-appointed trustee, by the
court.
6. The trustee shall use his or her best efforts to negotiate the
most favorable price and terms available in each contract that is
submitted to the Commission, subject to Praxair's absolute and
unconditional obligation to divest at no minimum price. The
divestiture(s) shall be made in the manner and to the acquirer or
acquirers as set out in Paragraph II of this order, provided, however,
if the trustee receives bona fide offers for any of the plants to be
divested from more than one acquiring entity, and if the Commission
determines to approve more than one such acquiring entity, the trustee
shall divest that particular plant to the acquiring entity or entities
selected by Praxair from among those approved by the Commission.
7. The trustee shall serve at the cost and expense of Praxair,
without bond or other security unless paid for by Praxair, on such
reasonable and customary terms and conditions as the Commission or a
court may set. The trustee shall have the authority to employ, at the
cost and expense of Praxair, such consultants, accountants, attorneys,
investment bankers, business brokers, appraisers, and other
representatives and assistants as are necessary to carry out the
trustee's duties and responsibilities. The trustee shall account for
all monies derived from the divestiture and all expenses incurred.
After approval by the Commission and, in the case of a court-appointed
trustee, by the court, of the account of the trustee, including fees
for his or her services, all remaining monies shall be paid at the
direction of Praxair, and the trustee's power shall be terminated. The
trustee's compensation shall be based at least in significant part on a
commission arrangement contingent on the trustee's divesting the
Merchant Divestiture Assets and Businesses.
[[Page 1576]]
8. Praxair shall indemnify the trustee and hold the trustee
harmless against any losses, claims, damages, liabilities, or expenses
arising out of, or in connection with, the performance of the trustee's
duties, including all reasonable fees of counsel and other expenses
incurred in connection with the preparation for, or defense of any
claim, whether or not resulting in any liability, except to the extent
that such liabilities, losses, damages, claims, or expenses result from
misfeasance, gross negligence, willful or wanton acts, or bad faith by
the trustee.
9. If the trustee ceases to act or fails to act diligently, a
substitute trustee shall be appointed in the same manner as provided in
Paragraph III.A. of this order.
10. The Commission or, in the case of a court-appointed trustee,
the court, may on its own initiative or at the request of the trustee
issue such additional orders or directions as may be necessary or
appropriate to accomplish the divestiture required by this order.
11. The trustee shall have no obligation or authority to operate or
maintain the Merchant Divestiture Assets and Businesses.
12. In the event that the trustee determines that he or she is
unable to divest the Merchant Divestiture Assets and Businesses in a
manner consistent with the Commission's purpose as described in
Paragraph II, the trustee may divest additional ancillary CBI assets of
Praxair and effect such arrangements as are necessary to satisfy the
requirements of this order.
13. The trustee shall report in writing to Praxair and the
Commission every sixty (60) days concerning the trustee's efforts to
accomplish divestiture.
IV
It is further ordered that within sixty (60) days after the date
this order becomes final and every sixty (60) days thereafter until
Praxair has fully complied with Paragraphs II and III of this order,
Praxair shall submit to the Commission a verified written report
setting forth in detail the manner and form in which it intends to
comply, is complying, and has complied with Paragraphs II and III of
this order. Praxair shall include in its compliance reports, among
other things that are required from time to time, a full description of
the efforts being made to comply with Paragraphs II and III including a
description of all substantive contacts or negotiations for the
divestiture(s) required by this order, including the identity of all
parties contacted. Praxair shall include in its compliance reports
copies of all written communications to and from such parties, all
internal memoranda, and all reports and recommendations concerning the
divestiture(s).
V
It is further ordered that, for the purpose of determining or
securing compliance with this order, Praxair shall permit any duly
authorized representatives of the Commission:
A. Access, during office hours and in the presence of counsel, to
inspect and copy all books, ledgers, accounts, correspondence,
memoranda and other records and documents in the possession or under
the control of Praxair, relating to any matters contained in this
order; and
B. Upon five (5) days' notice to Praxair, and without restraint or
interference from Praxair, to interview officers, directors, or
employees of Praxair, who may have counsel present, regarding any such
matters.
VI
It is further ordered that until Praxair has completed all of its
obligations under this order, Praxair shall notify the Commission at
least thirty (30) days prior to any proposed change in the Respondent
such as dissolution, assignment, sale resulting in the emergence of a
successor corporation, or the creation or dissolution of subsidiaries
or any other change in the corporation that may affect compliance
obligations arising out of the order.
VII
It is further ordered that Respondent shall not be obligated to
comply with this Order if Praxair abandons the proposed acquisition of
CBI. For purposes of this Order, Praxair will be deemed to have
abandoned the proposed acquisition of CBI after it provides written
notice to the Commission that it has abandoned its proposed acquisition
and has withdrawn any related notifications filed pursuant to Section
7A of the Clayton Act, as amended, 15 U.S.C. 18a.
Appendix I
Agreement to Hold Separate
This Agreement to Hold Separate (``Hold Separate'') is by and
between Praxair, Inc. (``Praxair''), a corporation organized, existing,
and doing business under and by virtue of the laws of the state of
Delaware, and the Federal Trade Commission (``Commission''), an
independent agency of the United States Government, established under
the Federal Trade Commission Act of 1914, 15 U.S.C. 41, et seq.
(collectively, the ``Parties'').
Premises
Whereas, on November 3, 1995, Praxair offered to purchase all of
the outstanding common shares of CBI Industries, Inc. (``CBI''); and
Whereas, CBI, with its principal office and place of business
located at 800 Jorie Boulevard, Oak Brook, Illinois 60521-2268,
manufactures and markets, among other things, Merchant Atmospheric
Gases; and
Whereas, Praxair, with its principal office and place of business
located at 39 Old Ridgebury Road, Danbury, Connecticut 06810-5113,
manufactures and markets, among other things, Merchant Atmospheric
Gases; and
Whereas, the Commission is now investigating the Acquisition to
determine whether it would violate any of the statutes enforced by the
Commission; and
Whereas, if the Commission accepts the Agreement Containing Consent
Order (``Consent Agreement''), the Commission must place it on the
public record for a period of at least sixty (60) days and may
subsequently withdraw such acceptance pursuant to the provisions of
Section 2.34 of the Commission's Rules; and
Whereas, the Commission is concerned that if an understanding is
not reached, preserving the status quo ante of the Merchant Divestiture
Assets and Businesses, as defined in Paragraph I.G. of the Consent
Agreement, during the period prior to the final acceptance and issuance
of the Consent Agreement by the Commission (after the 60-day public
comment period), divestiture resulting from any proceeding challenging
the legality of the Acquisition might not be possible, or might be less
than an effective remedy; and
Whereas, the Commission is concerned that if the Acquisition is
consummated, it will be necessary to preserve the Commission's ability
to require the divestiture of the Merchant Divestiture Assets and
Businesses and the Commission's right to have the Merchant Divestiture
Assets and Businesses continue as viable competitors; and
Whereas, the purposes of this Hold Separate and the Consent
Agreement are:
A. to preserve the Merchant Divestiture Assets and Businesses as
viable, competitive, and independent businesses pending divestiture of
the Merchant Divestiture Assets and Businesses, and
[[Page 1577]]
B. to remedy any anticompetitive effects of the Acquisition; and
Whereas, Praxair's entering into this Hold Separate shall in no way
be construed as an admission by Praxair that the Acquisition is
illegal; and
Whereas, Praxair understands that no act or transaction
contemplated by this Hold Separate shall be deemed immune or exempt
from the provisions of the antitrust laws or the Federal Trade
Commission Act by reason of anything contained in this Hold Separate.
Now, therefore, the Parties agree, upon the understanding that the
Commission has not yet determined whether the Acquisition will be
challenged, and in consideration of the Commission's agreement that, at
the time it accepts the Consent Agreement for public comment, it will
grant early termination of the Hart-Scott-Rodino waiting period, as
follows:
1. Praxair agrees to execute and be bound by the Consent Agreement.
2. Praxair agrees that from the date this Hold Separate is accepted
until the earliest of the times listed in subparagraphs 2.a.-2.b., it
will comply with the provisions of Paragraph 3. of this Hold Separate:
a. three (3) business days after the Commission withdraws its
acceptance of the Consent Agreement pursuant to the provisions of
Section 2.34 of the Commission's Rules; or
b. the time that divestiture of the Merchant Divestiture Assets and
Businesses as required by Paragraph II of the Consent Agreement is
completed.
3. To assure the complete independence and viability of the
Merchant Divestiture Assets and Businesses, and to assure that no
material confidential information is exchanged between Praxair and the
Merchant Divestiture Assets and Businesses, Praxair shall hold the
Merchant Divestiture Assets and Businesses separate and apart on the
following terms and conditions:
a. Within 30 days from the date this Hold Separate becomes final
Praxair shall cause all of its rights, title and interest in the
Merchant Divestiture Assets and Businesses, as defined in Paragraph
I.G. of the Consent Agreement, as well as all such necessary personnel,
including but not limited to, payroll and marketing personnel, to be
transferred to a separate corporation (``Nucorp''), and effect any
other arrangements as are necessary to ensure that Nucorp has complete
viability and independence from Praxair (meaning here and hereinafter,
Praxair excluding the Merchant Divestiture Assets and Businesses,
personnel connected with the Merchant Divestiture Assets and
Businesses, and Nucorp as of the date this Agreement is signed, but
including all other portions of CBI).
b. Nucorp shall be held separate and apart and shall be managed and
operated independently of Praxair, except to the extent that Praxair
must exercise direction and control over Nucorp to assure compliance
with this Hold Separate or the Consent Agreement.
c. Praxair shall maintain the marketability, viability, and
competitiveness of Nucorp, including the Merchant Divestiture Assets
and Businesses, and shall not cause or permit the destruction, removal,
wasting, deterioration, or impairment of any assets or business it may
have to divest except in the ordinary course of business and except for
ordinary wear and tear, and it shall not sell, transfer, encumber
(other than in the normal course of business), or otherwise impair the
marketability, viability or competitiveness of Nucorp including the
Merchant Divestiture Assets and Businesses.
d. Praxair shall appoint a knowledgeable person among the top
management of CBI's Merchant Atmospheric Gases Business to manage and
maintain Nucorp on a day to day basis during the term of the Hold
Separate. The manager shall have exclusive management and control of
Nucorp, and shall manage Nucorp independently of Praxair's other
businesses.
e. The Manager shall report exclusively to the Nucorp Management
Committee (``Management Committee''). The Management Committee shall
consist of the Manager; two other knowledgeable persons from among the
top management of CBI's Merchant Atmospheric Gases Business; and two
Praxair financial officers or comparable, knowledgeable persons from
Praxair's financial office who have no direct involvement with
Praxair's Merchant Atmospheric Gases Business (``Praxair Management
Committee Members''). The Chairman of the Management Committee shall be
the Manager. Except for the Praxair Management Committee Members
serving on the Management Committee, Praxair shall not permit any
officer, employee, or agent of Praxair also to be an officer, employee
or agent of Nucorp. Each Management Committee member shall enter into a
confidentiality agreement agreeing to be bound by the terms and
conditions set forth in Attachment A, appended to this Hold Separate.
The Management Committee shall meet monthly during the course of the
Hold Separate, and as otherwise necessary. Meetings of the Management
Committee during the term of the Hold Separate shall be audio recorded,
and the recording shall be retained for two (2) years after the
termination of the Hold Separate.
f. All material transactions, out of the ordinary course of
business and not precluded by Paragraph 3 hereof, shall be subject to a
majority vote of the Management Committee.
g. Praxair shall not exercise direction or control over, or
influence directly or indirectly, Nucorp, including the Merchant
Divestiture Assets and Businesses, the Management Committee, or the
Manager of Nucorp, any of their operations, assets, or businesses;
provided, however, that Praxair may exercise only such direction and
control over Nucorp as is necessary to assure compliance with this Hold
Separate, the Consent Order and with all applicable laws and except as
otherwise provided in this Hold Separate.
h. Except as required by law, and except to the extent that
necessary information is exchanged in the course of evaluating and
consummating the Acquisition, defending investigations or litigation,
obtaining legal advice, complying with this Hold Separate or the
Consent Order or negotiating agreements to divest assets, Praxair shall
not receive or have access to, or the use of, any material confidential
information of Nucorp or the activities of the Manager or Management
Committee not in the public domain, nor shall Nucorp, the Manager, or
the Management Committee receive or have access to, or the use of, any
material confidential information about Praxair. Praxair may receive on
a regular basis from Nucorp aggregate financial information necessary
and essential to allow Praxair to file financial reports, tax returns,
and personnel reports. Any such information that is obtained pursuant
to this subparagraph shall be used only for the purposes set forth in
this subparagraph. (``Material confidential information,'' as used
herein, means competitively sensitive or proprietary information,
including, but not limited to, customer lists, price lists, marketing
methods, patents, technologies, processes, or other trade secrets, not
independently known to:
1. Praxair, with regard to Nucorp, including the Merchant
Divestiture Assets and Businesses, from sources other than Nucorp or
its employees or the Management Committee; or
2. The Management Committee or Nucorp or its employees, with regard
to Praxair, from sources other than Praxair.)
[[Page 1578]]
i. Except as is permitted by this Hold Separate, the Praxair
Management Committee Members shall not receive any Nucorp material
confidential information and shall not disclose any such information
obtained through their involvement with Nucorp to Praxair or use it to
obtain any advantage for Praxair. The Praxair Management Committee
Members shall participate in matters that come before the Management
Committee only for the limited purpose of considering any capital
investment of over $250,000, approving any proposed budget and
operating plans, authorizing dividends and repayment of loans
consistent with the provisions hereof, reviewing material transactions
described in subparagraph 3.f, and carrying out Praxair's
responsibilities under the Hold Separate and the Consent Agreement.
Except as permitted by the Hold Separate, the Praxair Management
Committee Members shall not participate in any matter, or attempt to
influence the votes of the other directors on the Management Committee
with respect to matters that would involve a conflict of interest
between Praxair and Nucorp, including the Merchant Divestiture Assets
and Businesses.
j. Praxair shall not change the composition of the Management
Committee unless a majority of the Management Committee consents. The
Chairman of the Management Committee shall have the power to remove
members of the Management Committee for cause and to require Praxair to
appoint replacement members to the Management Committee in the same
manner as provided in Paragraph 3.e. of this Hold Separate. Praxair
shall not change the composition of the management of the Merchant
Divestiture Assets and Businesses, except that the Management Committee
shall have the power to remove management employees for unsatisfactory
performance or for cause.
k. If the Chairman of the Management Committee ceases to act or
fails to act diligently, a substitute Chairman shall be appointed in
the same manner as provided in Paragraphs 3.d. and 3.e.
l. CBI personnel connected with Nucorp or the Merchant Divestiture
Assets and Businesses or providing support services to Nucorp or the
Merchant Divestiture Assets and Businesses as of the date this Hold
Separate is signed shall continue, as employees of Praxair, to provide
such services as of the date of this Hold Separate. Such Praxair
personnel must retain and maintain all material confidential
information relating to Nucorp, including the Merchant Divestiture
Assets and Businesses on a confidential basis and, except as is
permitted by this Hold Separate, such persons shall be prohibited from
providing, discussing, exchanging, circulating, or otherwise furnishing
any such information to or with any other person whose employment
involves any other Praxair business.
Such Praxair personnel shall also execute a confidentiality
agreement prohibiting the disclosure of any material confidential
information concerning Nucorp, including the Merchant Divestiture
Assets and Businesses, or Praxair information.
m. Nucorp shall be staffed with sufficient employees to maintain
the viability and competitiveness of the Merchant Divestiture Assets
and Businesses, which employees shall be Nucorp employees and may also
be hired from sources other than Praxair. Each management employee of
Nucorp shall execute a confidentiality agreement prohibiting the
disclosure of any material confidential information concerning Nucorp.
n. Praxair shall circulate to the management employees of Nucorp
and appropriately display a notice of this Hold Separate and Consent
Order in the form attached hereto as Attachment A.
o. Praxair shall cause Nucorp to expend funds for research and
development, quality control, manufacturing and marketing of the
products produced at Nucorp at a level not lower than that budgeted for
the 1994 fiscal year, and shall increase such spending as deemed
reasonably necessary in light of competitive conditions. Within thirty
(30) days of the date of this Hold Separate, the Chairman of the
Management Committee shall develop a budget and operating plan for the
1996 fiscal year that complies with the provisions of this Paragraph
and present it to the Management Committee for approval. If necessary,
Praxair shall provide Nucorp with any funds to accomplish the
foregoing. Praxair shall provide to Nucorp such support services as
provided by CBI prior to the Acquisition.
p. Praxair shall provide Nucorp with sufficient working capital to
operate at a level not less than the rate of operation in effect during
the twelve (12) months preceding the date of this Hold Separate.
q. The Management Committee shall serve at the cost and expense of
Praxair. Praxair shall indemnify the Management Committee against any
losses or claims of any kind that might arise out of its involvement
under this Hold Separate, except to the extent that such losses or
claims result from misfeasance, gross negligence, willful or wanton
acts, or bad faith by the Management Committee members.
r. The Management Committee shall have access to and be informed
about all companies who inquire about, seek or propose to buy the
Merchant Divestiture Assets and Businesses.
s. Notwithstanding the provisions of Paragraph 3.i., companies who
undertake a due diligence process in the course of negotiations to
purchase Nucorp, or any part thereof, may be accompanied and assisted
by either or both of the Praxair Management Committee Members, in
addition to appropriate Nucorp employees selected by the Management
Committee. The Praxair Management Committee Members may delegate tasks
relating to such due diligence to attorneys, accountants and/or other
financial employees of Praxair who are not directly engaged in the
Praxair Merchant Atmospheric Gases Business; provided, however, that
such Praxair employees, accountants and attorneys shall execute a
confidentiality agreement prohibiting the disclosure of any Nucorp
material confidential information.
4. Should the Federal Trade Commission seek in any proceeding to
compel Praxair to divest itself of Nucorp, or any additional assets, as
provided in the Consent Agreement, or to seek any other injunctive or
equitable relief, Praxair shall not raise any objection based on the
expiration of the applicable Hart-Scott-Rodino Antitrust Improvements
Act waiting period or the fact that the Commission has permitted the
Acquisition. Praxair shall also waive all rights to contest the
validity of this Hold Separate.
5. To the extent that this Hold Separate requires Praxair to take,
or prohibits Praxair from taking, certain actions that otherwise may be
required or prohibited by contract, Praxair shall abide by the terms of
this Hold Separate or the Consent Agreement, and shall not assert as a
defense such contract requirements in any action brought by the
Commission to enforce the terms of this Hold Separate or the Consent
Agreement.
6. For the purpose of determining or securing compliance with this
Hold Separate, subject to any legally recognized privilege or provision
of applicable law, and upon written request with reasonable notice to
Praxair made to its General Counsel, Praxair shall permit any duly
authorized representative or representatives of the Commission:
[[Page 1579]]
a. Access during the office hours of Praxair and in the presence of
counsel to inspect and copy all books, ledgers, accounts,
correspondence, memoranda, and other records and documents in the
possession or under the control of Praxair or relating to compliance
with this Hold Separate;
b. Upon five (5) days' notice to Praxair, and without restraint or
interference from it, to interview officers or employees of Praxair,
who may have counsel present, regarding any such matters.
7. This Hold Separate shall not be binding until approved by the
Commission.
Attachment A--Notice of Divestiture and Requirement for Confidentiality
Praxair, Inc. (``Praxair'') and CBI Industries, Inc. have entered
into a Consent Agreement and Agreement to Hold Separate with the
Federal Trade Commission (``Commission'') relating to the divestiture
of the Merchant Divestiture Assets and Businesses. Until after the
Commission's Order becomes final and the Merchant Divestiture Assets
and Businesses are divested, the Merchant Divestiture Assets and
Businesses must be managed and maintained as a separate company,
independent of all other Praxair businesses. All competitive
information relating to The Merchant Divestiture Assets and Businesses
must be retained and maintained by the persons involved in the Merchant
Divestiture Assets and Businesses on a confidential basis and such
persons shall be prohibited from providing, discussing, exchanging,
circulating, or otherwise furnishing any such information to or with
any other person whose employment or agency involves any other Praxair
business. Similarly, all such persons involved in any other Praxair
business shall be prohibited from providing, discussing, exchanging,
circulating or otherwise furnishing competitive information about such
business to or with any person whose employment or agency involves the
Merchant Divestiture Assets and Businesses.
Any violation of the Consent Agreement or the Agreement to Hold
Separate, incorporated by reference as part of the Consent Order, may
subject Praxair to civil penalties and other relief as provided by law.
Analysis of Proposed Consent Order to Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted subject
to final approval an agreement containing a proposed Consent Order from
Praxair, Inc. (``Praxair''), under which Praxair will be required to
divest all of the assets and businesses relating to four CBI
Industries, Inc. (``CBI'') plants that produce atmospheric gases. In
addition, the Commission has accepted an Agreement to Hold Separate
(``Hold Separate''), under which Praxair will be required to preserve
the assets to be divested as viable, competitive and independent
businesses pending divestiture.
The proposed Consent Order has been placed on the public record for
sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will again review the
agreement and the comments received, and will decide whether it should
withdraw from the agreement or make final the agreement's proposed
Order.
Pursuant to a cash tender offer dated November 3, 1995, Praxair
proposed to acquire all of the common shares of CBI in a transaction
valued at approximately $2.0 billion. On December 22, 1995, the parties
entered into a definitive agreement whereby Praxair will purchase all
of CBI's common shares. The proposed complaint alleges that the
acquisition, if consummated, would violate Section 7 of the Clayton
Act, as amended, 15 U.S.C Sec. 18, and Section 5 of the Federal Trade
Commission Act, as amended, 15 U.S.C. Sec. 45, in the markets for
merchant oxygen and merchant nitrogen in Northern and Southern
California, Eastern Connecticut, and Western Wisconsin/Southeastern
Minnesota, and in the market for merchant argon in Eastern Connecticut,
and Western Wisconsin/Southeastern Minnesota.
Common air consists of three principal gases which exist in the
atmosphere in fixed proportions: nitrogen (78%); oxygen (21%); and
argon (0.9%). These gases are commonly referred to collectively as
``atmospheric gases.'' Nitrogen is used primarily to create inert
environments in applications such as heat treating and chemical
blanketing, and also for freezing purposes in industries such as food
products. Oxygen is used mainly for combustion and oxidization purposes
in applications such as foundries, and steel and glass production, and
also for medical purposes. Argon is mostly used for welding purposes.
Because of their unique properties, there are no adequate substitutes
for nitrogen, oxygen or argon. ``Merchant'' atmospheric gases are
products (nitrogen, oxygen and argon) supplied to customers in either
in bulk liquid form or gaseous form in cylinders.
Geographically, due to significant transportation costs, merchant
nitrogen and merchant oxygen can be economically shipped a maximum of
approximately 150 to 300 miles from the production facility, depending
on such factors as the degree of traffic congestion in a given area.
Merchant argon can be shipped much longer distances (up to
approximately 1,000 miles), because it is more expensive than nitrogen
and oxygen.
Praxair's acquisition of CBI would reduce the number of merchant
nitrogen and merchant oxygen competitors in both Northern and Southern
California from five to four. In the Northern California market, the
post-acquisition Herfindahl-Hirschman Index (``HHI'') would increase by
431 points to 3366, and Praxair would increase its share of that market
to 32%. In the Southern California market, the post-acquisition HHI
would increase by 440 points to 2727, and Praxair would become the
market leader with 34.8% of the market. In two additional areas,
Eastern Connecticut and Western Wisconsin/Southeastern Minnesota,
Praxair and CBI are each other's closest geographic competitor in
merchant nitrogen, oxygen and argon.
New entry into any of these four areas would also be time-consuming
and unlikely. Construction of a new manufacturing facility capable of
serving the merchant atmospheric gases markets takes approximately two
years, and is unlikely as a large percentage of a new plant's output
must be sold out prior to or shortly after opening in order to account
for the facility's opening costs and the need to operate the plant at a
sufficient level of capacity utilization.
Praxair's acquisition of CBI poses serious antitrust concerns. In
the Northern and Southern California markets for merchant nitrogen and
oxygen, the acquisition would eliminate direct actual competition
between Praxair and CBI, enhance the likelihood of coordinated
interaction, and thereby increase the likelihood that consumers would
be forced to pay higher prices. Coordinated interaction would be
enhanced in Northern and Southern California because merchant nitrogen
and oxygen are homogeneous products and the remaining firms in both
markets would be a fairly homogeneous group that have similar
incentives. In Eastern Connecticut and Western Wisconsin/Southeastern
Minnesota, where Praxair and CBI are each other's closest geographic
competitor in merchant nitrogen, oxygen and argon, the acquisition
would eliminate direct actual competition between the parties
[[Page 1580]]
and increase the likelihood that Praxair would unilaterally raise
prices to consumers.
Under the proposed Consent Order, Praxair is required to divest
four of CBI's atmospheric gases production facilities, either
individually or in some combination. These facilities are located in:
(1) Vacaville, California; (2) Irwindale, California; (3) Bozrah,
Connecticut; and (4) Madison, Wisconsin. The proposed Consent states
that this divestiture shall take place within twelve (12) months of the
date the proposed Order becomes final, and shall be to an acquirer or
acquirers approved by the Commission. If Praxair fails to divest the
assets within 12 months, a trustee may be appointed to divest the four
plants.
The proposed Order also requires Praxair to take all steps
necessary to ensure that the plants to be divested continue as ongoing,
viable and competitive operations. To this end, an Agreement to Hold
Separate is incorporated into the proposed Order to preserve the four
plants to be divested and to remedy any anticompetitive effects of the
acquisition. Under the Hold Separate, Praxair commits to assure the
complete independence and viability of the four plants to be divested.
Furthermore, to assure that no confidential information is exchanged
between Praxair and the businesses that will be divested, Praxair will
hold those businesses separate and apart from all of its other
operations.
The Order also requires Praxair to provide the Commission a report
of compliance with the divestiture provisions of the Order within sixty
(60) days following the date the Order becomes final, and every sixty
(60) days thereafter until Praxair has completed the required
divestiture.
Finally, with the exception of the Eastern Connecticut and Western
Wisconsin/Southeastern Minnesota areas, where Praxair and CBI are each
other's closest geographic competitor, the Complaint accompanying the
Consent Order does not allege a violation with respect to merchant
argon. Because merchant argon can be economically shipped significantly
greater distances than nitrogen and oxygen, the geographic market for
merchant argon most likely consists of the contiguous United States.
CBI's share of the argon market is extremely small, seven other
competitors would remain in the market after the acquisition, and
anticompetitive effects on a national scale appear unlikely. However,
localized unilateral anticompetitive effects are likely in the Eastern
Connecticut and Western Wisconsin/Southeastern Minnesota areas, where
Praxair and CBI are each other's closest competitors. The divestitures
that the proposed Consent Order requires in Eastern Connecticut and
Western Wisconsin/Southeastern Minnesota eliminate the likelihood of
unilateral anticompetitive effects in merchant argon in those areas.
The purpose of this analysis is to facilitate public comment on the
proposed Order, and it is not intended to constitute an official
interpretation of the agreement and proposed Order or to modify in any
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 96-788 Filed 1-19-96; 8:45 am]
BILLING CODE 6750-01-P