* Ardagh proposes divesting six plants
* U.S. FTC says considering the proposal
* Dispute began in July
By Diane Bartz
WASHINGTON, Dec 17 Irish packaging company
Ardagh Group SA is in settlement talks aimed at saving
a proposed $1.7 billion deal to buy the U.S. business of
Saint-Gobain unit Verallia in time to meet a
mid-January deadline, according to court documents.
The U.S. Federal Trade Commission has filed a complaint
against Ardagh, saying the deal for Verallia North America, a
rival glass bottle manufacturer, is illegal, but the two sides
seem to be finding common ground.
An FTC judge postponed a Tuesday pre-hearing conference,
saying that the "parties are actively involved in settlement
negotiations." A second hearing, which had been scheduled for
Thursday, was postponed until April.
Ardagh offered on Dec. 11 to sell six plants that make beer
and liquor bottles, which it acquired in 2012, Ardagh and the
FTC said in a joint motion made public on Tuesday.
"Complaint counsel (FTC) is not prepared to recommend the
settlement proposal to the commission at this time, but believes
the proposed divestitures (unlike the previous proposals) could,
if the appropriate conditions are met, lead to a recommendation
that the commission accept a consent settlement agreement," the
two sides said in the document.
The deal, if it happens, will be a big victory for the FTC
because of the size of Ardagh's divestiture, said antitrust
expert Allen Grunes of the law firm Geyer Gorey LLP.
"This signals that a negotiated resolution is happening,"
said Grunes. "They're (the FTC) doing everything but saying
If Ardagh does not close the acquisition by Jan. 13, it will
have to repay in full the bond offering that backed the deal,
and launch a new debt offering.
Saint-Gobain, which is selling Verallia, appeared
optimistic. "We've made considerable progress with the FTC so
far. We're confident, we're working with Ardagh to address the
FTC's concerns, and we're not talking about a plan B," said a
spokeswoman for Saint-Gobain.
Saint-Gobain, which was founded in 1665 to produce mirrors
for the royal court at Versailles, struck the deal in January to
sell its North American glass container operation to Ardagh.
Saint-Gobain plans to exit the low-margin
business to focus on higher-margin building materials.
The FTC, which investigated the deal to determine if it was
legal under antitrust law, sued to stop the transaction in July.
The companies dominate the $5 billion U.S. market for glass
containers. The FTC argued that the deal would combine the
second-largest U.S. glass container maker, Verallia, with the
third-largest, Ardagh. The result, the FTC said, was that Ardagh
and No. 2, Owens-Illinois Inc, would make more than 75
percent of the beer and hard liquor bottles used in the United
Ardagh entered the U.S. glass container market in 2012 when
it bought third-ranking Anchor Glass Container Corp and the much
smaller Leone Industries.
Verallia North America makes jars and bottles for everything
from wine to oils and vinegars, according to its website.
Potentially complicating the settlement, the FTC will likely
take a harder than usual look at any company buying divested
assets since the agency's recent settlement with Hertz, which
bought Dollar Thrifty, ended in embarrassment.
To win FTC approval, Hertz Global Holdings Inc
agreed to shed its discount brand Advantage Rent A Car. But
Advantage, which was sold to Macquarie Capital, filed for
bankruptcy within months.
"In light of Hertz debacle, it (FTC review of any deal)
should be extremely tough," said Robert Doyle, a former deputy
director in the FTC's Bureau of Competition who is now at the
law firm at Doyle, Barlow and Mazard PLLC. Doyle also spoke
before the settlement talks were announced.