Beech-Nut/Heinz Defeat FTC Preliminary Injunction Motion in Precedent-Setting Antitrust Case
On October 18, Federal District Court Judge James Robertson denied the Federal Trade Commission's request for preliminary injunction to block a merger between Kirkland & Ellis client, Milnot Holdings Corporation (owner of Beech-Nut brand baby food) and the acquiring company, H. J. Heinz Company, over the objection of the FTC. Milnot is majority owned by Kirkland & Ellis client Madison Dearborn Partners.
The Court's denial of the preliminary injunction is a major victory for baby food consumers, and marks a significant development in antitrust law. In the words of the FTC, "no court" has ever permitted a "three to two merger" over the opposition of the government. In a 28-page opinion denying the FTC's motion, Judge Robertson cited the "dominant market share" Gerber has enjoyed for decades in the baby food industry, and found that the parties had "rebutted [the FTC's] case with proof that the proposed merger will in fact increase competition" in jarred baby food in the United States. In making this finding, the Court cited and credited the "powerful evidence ... about the efficiencies realized by the merger, and ... the enhanced prospects of the merged entity to introduce innovative products to compete with Gerber." The Court concluded the "FTC failed to sustain its burden of persuasion for the proposition that it is likely to succeed on the merits."
The FTC has filed a notice of appeal to the D.C. Circuit, which the parties will challenge.
Deal negotiations, led by William S. Kirsch and Edward T. Swan with assistance from Chris Kallos and Austin Krumpfes in Kirkland's Chicago office, lasted throughout the summer as negotiations with the FTC were ongoing. Once the FTC initiated the lawsuit, Tefft W. Smith and Mark L. Kovner in Kirkland's Washington office led the trial with assistance from Christopher Landau and Gerald Masoudi and associates Michael Becker, Colin Kass, David Pruitt, Elizabeth Deeley and Matthew Wild.
