November 30, 2017
Antitrust: Minority Investors’ Stake in Competitor Leads to FTC Merger Challenge
This Shearman & Sterling memo highlights a recent FTC challenge to a pending deal prompted by ownership interests that two of the buyer’s minority shareholders held in a competitor. Here’s the intro:
On November 3, 2017, the Federal Trade Commission filed a complaint challenging Red Ventures’ proposed acquisition of Bankrate. The FTC alleged that the deal likely would have lessened competition in the market for third-party paid referral services for senior living facilities—even though Red Ventures was not itself present in that market—since two of Red Ventures’ large private equity shareholders jointly own the closest competitor to Bankrate’s Caring.com. To remedy the FTC’s concerns, Red Ventures agreed to divest Caring.com.
The memo notes that the FTC’s action is a reminder that PE-backed entities must consider their shareholders’ portfolio companies when assessing the antitrust risks of a merger, & that minority shareholders can raise competition concerns among antitrust regulators. Those competition concerns are heightened when minority shareholders have the ability to influence company management.
– John Jenkins