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Libbey Inc. and the Anchor Hocking unit of Newell Rubbermaid Inc. are attempting to revive their merger by making a novel legal argument to the federal judge who has blocked their deal. A victory for the companies could significantly alter how companies fight Federal Trade Commission antitrust cases. The companies contend that the injunction should be lifted because they have amended the transaction to eliminate pricing disparities and employment contract issues that U.S. District Judge Reggie Walton of the District of Columbia cited as reasons for stopping the deal. “The factual circumstances that the court found to require injunctive relief have been eliminated,” the companies said in a memorandum of law. The document was filed last Thursday under seal; a public version was released Monday. The glassmaker said in the same filing that it also has secured additional short-term financing for the deal. A source said the funding extends through mid-June. The initial financing expired last Wednesday. Libbey’s lawyer had suggested the company might be unable to extend that funding because it was tied to a larger refinancing of the manufacturer’s debt. Libbey agreed to buy Anchor Hocking from Newell in June for $332 million; the deal is now valued at $277 million. But the FTC objected and authorized a suit in December. Libbey and Newell responded Jan. 21 by restructuring the deal to exclude the Anchor Hocking unit that sells glasses to restaurants, which is the market the FTC said would be hurt by the merger. Walton ruled April 22 that Libbey and Newell had a right to amend their deal in response to FTC antitrust objections, but he concluded that the revised deal also violated the law because Newell would have to pay 4.3 percent more to outsource the production of glasses than it spent to make them in plants being sold to Libbey. He also said Newell was not retaining enough key employees to make its foodservice unit successful. In the latest court filing, Newell said it has renegotiated the outsourcing contract with Owens-Illinois Inc. so that its ultimate costs will be lower than what it now spends to make the glassware in-house. Newell also said it would retain five additional employees involved in selling glassware to restaurants, including the vice president for operations and the national sales manager for food service. Finally, Libbey and Newell said they would consent to a new injunction that would bar Libbey from integrating the Anchor Hocking plants into its system until after an FTC administrative law judge rules on the case, which would be the next step in the legal process if the companies do not abandon the deal. While Walton in his April order gave companies a right to try to fix their deals in response to FTC objections, he did not address whether firms could amend their merger agreements in response to court decisions. Toledo, Ohio-based Libbey and Freeport, Ill.-based Newell cited two cases to support their position. They argue that in the 1984 case White Consolidated Industries Inc. v. Whirlpool Corp., a judge rescinded an injunction blocking a merger after the parties altered a supply agreement that the court considered anticompetitive. The companies also cite the 1969 case U.S. v. Atlantic Richfield Co., in which Arco sold properties in the Southeast that the judge identified in his order as posing a competitive problem. “Like the merging parties in Arco and White Consolidated, the parties here immediately responded to the court’s injunction order by addressing those elements of the transaction identified by the court as potentially anticompetitive,” Libbey and Newell wrote. Stephen Calkins, a former FTC general counsel who is now a professor at Wayne State University law school in Detroit, said neither case fully supports Libbey and Newell. He said that in the Arco case the company completely eliminated the competitive overlap by selling the assets to a third party. Also, the Justice Department did not oppose revoking the injunction. Newell proposes to retain the disputed assets, and the FTC still supports the injunction. In White Consolidated, the suit involved two private parties. Calkins said that makes a difference because the court is the final arbitrator of how to protect the public. In this case, that role rests with the FTC’s administrative process. All the court is being asked to do in the Libbey case is to stay the transaction pending the ALJ’s review, he said. Libbey lawyer James Kearney of Latham & Watkins in New York and an FTC spokesman declined to comment. The agency is expected to file its response on Monday. Antitrust lawyers were skeptical that the judge would accept Libbey’s and Newell’s argument but said a ruling in their favor could have grave implications for antitrust enforcers. “The judge is likely to be unsympathetic,” said William Baer, a partner at Washington, D.C.’s Arnold & Porter and a former director of the FTC’s competition bureau. Permitting companies to redo deals after trial would mean that the antitrust agencies could be required to continuously devote resources to a case. “There would never be finality,” he said. “It could go on forever.” William Blumenthal, a partner at King & Spalding in Washington, D.C., said the judge may be less receptive to efforts by the companies to amend the deal when it is before him than when it was before the FTC. “The court’s disposition I would expect to be that at a certain point there has to be some repose because this is a busy court,” he said. Calkins said this is part of a continuing trend of companies putting their best offer on the table later and later in the negotiating process. “If this gambit were to succeed, then anyone who loses a preliminary injunction will try it, and companies will put off even longer making their best offer.” Copyright (c)2002 TDD, LLC. All rights reserved.

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