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From Antitrust Law Daily, April 09, 2018

Consent decree approving combination of aggregates companies approved

By Jeffrey May, J.D.

The federal district court in Washington, D.C. approved a consent decree, resolving U.S. Department of Justice and Tennessee state antitrust concerns over the acquisition by the nation’s largest producer of construction aggregates of a smaller rival aggregates business. Under the terms of the consent decree, which the court found to be in the public interest, Vulcan Materials Company was permitted to acquire SPO Partners II, L.P.’s aggregates business, Aggregates USA, LLC, subject to the divestiture of all of Aggregates USA’s active aggregate quarries, plants, and yards in the Knoxville, Tennessee, Tri-Cities, Tennessee, and Abingdon, Virginia, areas (U.S. v. Vulcan Materials Co., April 6, 2018, Mehta, A.).

On December 22, 2017, the U.S. Department of Justice and the State of Tennessee filed a civil antitrust lawsuit, challenging the transaction on the ground that transaction, as originally proposed, would have eliminated one of the two suppliers of coarse aggregate in parts of east Tennessee and southwest Virginia. According to the complaint, the primary assets being acquired were Aggregates USA’s 13 active quarries, including nine quarries in east Tennessee and one quarry in southwest Virginia, the equipment used to operate those quarries, and several inactive quarries in east Tennessee. Coarse aggregate is one of the primary materials used to build, pave, and repair roads, is used widely in other types of construction, and is an essential input in asphalt concrete. Prior to the acquisition, Vulcan held a significant market share in each region, the government contended.

At the same time that the complaint was filed, the Justice Department filed a proposed consent decree that, if approved by the court, would resolve the competition concerns. According to the Justice Department, the divestiture requirement of the settlement is intended to eliminate the anticompetitive effects of the acquisition in the production and sale of Department of Transportation-qualified coarse aggregate in the Knoxville, Tri-Cities, and Abingdon areas by establishing a new, independent, and economically viable competitor.

When Vulcan Materials announced the closing of the acquisition on January 2, it said that the deal expanded the company’s footprint in Georgia, South Carolina, and Florida, added to its product offering, and expanded its distribution network and service areas. "The acquisition, which closed on December 29, includes three granite quarries in Georgia and 16 rail distribution yards in Georgia, South Carolina, and Florida," the company said. Pursuant to the Justice Department settlement, Vulcan divested assets relating to the operations in Tennessee and Virginia to Blue Water Industries LLC.

The case is No. 1:17-cv-02761.

Attorneys: J.D. Owen, U.S. Department of Justice, and Victor J. Domen, Jr., Office of the Tennessee Attorney General, for the plaintiffs. Thomas O. Barnett (Covington & Burling LLP) for Vulcan Materials Co. Steven L. Holley (Sullivan & Cromwell LLP) for Aggregates USA LLC and SPO Partners II, L.P.

Companies: Vulcan Materials Company; Aggregates USA, LLC; SPO Partners II, L.P.; Blue Water Industries LLC

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