At some point in their careers, every deal lawyer has been involved in a situation in which the business decision is made that, despite a potentially significant unresolved issue, the parties will move forward and “close through it.” A decision like that always involves a willingness to accept some risk, but it takes real fortitude to close through an unresolved HSR review in which all sitting FTC commissioners have expressed opposition to your deal.
Nevertheless, that’s what 7-Eleven & Marathon apparently decided to do with 7-Eleven’s purchase of Marathon’s nearly 4,000 Speedway gas stations/convenience stores. Here’s an excerpt from this Freshfields’ blog:
On May 14, 7-Eleven closed its $21 billion acquisition of approximately 3,800 Speedway retail gasoline and convenience store outlets from Marathon Petroleum, despite FTC commissioners unanimously asserting objections to the transaction.
All four commissioners acknowledged that the transaction presented antitrust issues, but the Commission evidently failed to reach a majority-supported resolution before the Hart-Scott-Rodino waiting period expired and the parties’ timing agreements with FTC staff lapsed – paving the way for closure of the transaction. Lack of Commission resolution within the prescribed framework highlights the uncertainty parties face under a politically and ideologically divided (i.e., 2 Democrats: 2 Republicans) Commission.
The blog notes that the two Democrats issued a statement contending that the transaction may well be illegal & that the parties closed it “at their own risk.” The two Republicans countered with a statement alleging that their counterparts “failed to act” and provided nothing more than a “strongly worded statement,” despite having nearly a year to address the antitrust concerns raised by the deal.
With statements like that from the commissioners, it’s pretty clear that the decision to close the deal involved some courage. But it’s also apparent that there was quite a bit of exasperation with the process as well. Check out this excerpt summarizing 7-Eleven’s statement about its reasons for moving forward with the transaction:
– 7-Eleven entered into a timing agreement with FTC staff, which it extended four times at the request of staff, that permitted the transaction to close on May 14.
– 7-Eleven had also negotiated a settlement agreement involving divestiture of 293 fuel outlets that FTC staff recommended the Commission approve.
– On May 11 – less than three days before the scheduled closing date – Acting Chairwoman Slaughter and Commissioner Chopra asked for more time to review the settlement agreement. According to 7-Eleven, the only concern articulated by the two Commissioners was that the agreement allowed too much time for divestiture, with 7-Eleven contending it had offered to shorten this period several times.
The blog also points out that 7-Eleven was facing a contractual obligation to close the transaction within business days of the satisfaction of the deal’s closing conditions (which included the expiration of the HSR waiting period).
Whatever happens next, this isn’t a good look for the FTC, and the apparent gridlock over this deal makes confirmation of a new chair & the appointment of a replacement for Commissioner Chopra (who has been nominated to head the CFPB) even more imperative. While President Biden’s nominee for chair position, Lina Khan, has cleared the Senate Commerce Committee, a confirmation vote hasn’t been scheduled, and a replacement for Commissioner Chopra hasn’t been nominated. Meanwhile, the Democrats seem to be slow-walking Chopra’s CFPB confirmation in order to avoid the potential for the Republicans to find themselves with a 2-1 temporary majority on the FTC.
– John Jenkins