On May 14, 2014, Louisiana-Pacific Corporation (Louisiana
Pacific) and Ainsworth Lumber Co. Ltd. (Ainsworth) mutually agreed
to terminate their agreement in which Louisiana Pacific would
acquire Ainsworth. Approximately eight months after announcing the
transaction last September, the parties concluded that the Canadian
and U.S. competition approvals "cannot be obtained without
divestitures significantly beyond those contemplated in the
Arrangement Agreement without engaging in lengthy and expensive
litigation with the regulatory authorities".
Louisiana Pacific is a manufacturer of engineered wood building
materials, including oriented stranded board (OSB). Louisiana
Pacific has manufacturing facilities in the U.S., Canada (British
Columbia, Manitoba), Chile and Brazil.
Ainsworth is also an OSB manufacturer, with four facilities in
Canada (Alberta, British Columbia and Ontario).
OSB is a product that is primarily used in the construction or
renovation of homes.
Likely to Substantially Lessen Competition for the supply
of OSB in British Columbia and the Pacific Northwest and Upper
Midwest regions of the U.S.
The Canadian Competition Bureau (Bureau) and U.S. Department of
Justice (U.S. DOJ) coordinated their respective reviews of the
The Bureau concluded that the acquisition, as proposed, would
have likely resulted in a substantial lessening of competition for
the supply of OSB in British Columbia arising from factors such as
the parties' high post-closing market share (60%), high
barriers to entry and expansion and lack of effective remaining
competitors. The Bureau believed that the remaining competitors
would likely not constrain the parties from charging higher prices.
It also observed that information about prices, costs and annual
statistics is readily available in the OSB industry, noting that
this would make it easier for rivals to coordinate their behaviour.
On a similar basis, the U.S. DOJ concluded that the transaction
likely would have substantially lessened competition for the
production of OSB sold to customers in the Pacific Northwest and
Upper Midwest regions of the U.S.
Not surprisingly, Louisiana Pacific's CEO, Curt Stevens,
disagreed with the regulators:
"We believe this transaction would have led to positive
outcomes for customers, employees and shareholders, and
fundamentally disagree with the analysis by antitrust agencies of
the competitive dynamics of our industry. Our business experience,
supported by expert economic analysis, continues to be that North
America is an integrated market for structural panels. We will
continue to compete on a continent-wide basis but feel we have no
choice but to terminate the agreement rather than accept the
distraction, disruption, costs and risk of litigating this matter
in both the U.S. and Canada, where the process could take upwards
of a year".
This transaction highlights the risk of regulatory challenge of
a complex antitrust merger. Following announcement of the
transaction, the parties issued news releases indicating that they
had each received information requests for additional information
from both regulators (known as a "supplementary information
request" from the Bureau and "second request" from
the US DOJ). The parties also entered into timing agreements with
the regulators agreeing that they would not consummate the
acquisition before a certain date, as well as agreeing to extend
the outside date for completion. Presumably, the merging parties
incurred significant transaction costs and devoted significant
effort and time, only to abandon the deal. Merging parties are well
advised to take the risk of substantial delay (in addition to
substantive factors) into account in assessing the antitrust risk
associated with complex mergers.
The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).