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1
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PROPOSED DECISION AND ORDER
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EXTRACTED KEY WORDS
RALSTON COMMISSION AGREEMENT ACQUISITION DIVESTITURE TRUSTEE CONSENT NESTLE PARAGRAPH PURPOSES RALSTON ASSETS FEDERAL TRADE COMMISSION RALSTON ACQUIRER RALSTON PURINA MONITOR CHILDS ACQUISITION AGREEMENT COMPETITION THEREAFTER TRADE COMMISSION ACT RALSTON ACQUIRER INFORMATION JURISDICTIONAL FACTS RALSTON PURINA COMPANY NESTLE HOLDINGS ALLEY CAT PRODUCT OBLIGATIONS SUCCESSORS REPRESENTATIVES RESPONDENTS DIVEST INTERNATIONAL ASSETS INTERNATIONAL TRADEMARKS |
011 0083
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS: Timothy J. Muris, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
Thomas B. Leary
___________________________________
)
In the matter of )
)
Nestle Holdings, Inc., ) Docket No. C-
a corporation, and )
)
Ralston Purina Company, )
a corporation. )
___________________________________ )
DECISION AND ORDER
The Federal Trade Commission ("Commission") having initiated an investigation of the pro-
posed acquisition by Respondent Nestle Holdings, Inc. of certain voting securities of Respondent
Ralston Purina Company, and Respondents having been furnished thereafter with a copy of the draft of
Complaint that the Bureau of Competition proposed to present to the Commission for its consideration
and that, if issued by the Commission, would charge Respondents with violations of Section 7 of the
Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. § 45; and
Respondents, their attorneys, and counsel for the Commission having thereafter executed an
Agreement Containing Consent Orders ("Consent Agreement"), an admission by Respondents of all
the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the
Consent Agreement is for settlement purposes only and does not constitute an admission by Respon-
dents that the law has been violated as alleged in such Complaint, or that the facts as alleged in
Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required
Commission's Rules; and
The Commission having thereafter considered the matter and having determined that it had
reason to believe that Respondents have violated the said Acts and that a Complaint should issue
stating its charges in that respect, and having thereupon issued its Complaint and its Order to
Assets and having accepted the executed Consent Agreement and placed such Consent Agreement on
the public record for a period of thirty (30) days for the receipt and consideration of public
now in further conformity with the procedure described in Commission Rule 2.34, 16 C.F.R. § 2.34,
SNIPPETS:
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2
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ORDER TO MAINTAIN ASSETS
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EXTRACTED KEY WORDS
RALSTON AGREEMENT COMMISSION ACQUISITION ASSETS CONSENT AGREEMENT NESTLE PURPOSES COMPETITION RALSTON ACQUIRER FEDERAL TRADE COMMISSION MONITOR PARAGRAPH RALSTON PURINA RALSTON BUSINESS COMPLAINT RALSTON ACQUIRER INFORMATION JURISDICTIONAL FACTS THEREAFTER NESTLE HOLDINGS ALLEY CAT PRODUCT JURISDICTIONAL FACTS SET ATTORNEYS RALSTON PURINA COMPANY CHILDS ACQUISITION AGREEMENT COMPLIANCE INTERNATIONAL TRADEMARKS MANUFACTURING SUCCESSORS |
011 0083
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS: Timothy J. Muris, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
Thomas B. Leary
___________________________________
)
In the matter of )
)
Nestle Holdings, Inc., ) Docket No. C- 4028
a corporation, and )
)
Ralston Purina Company, )
a corporation. )
___________________________________ )
ORDER TO MAINTAIN ASSETS
The Federal Trade Commission ("Commission") having initiated an investigation of the
proposed acquisition by Respondent Nestle Holdings, Inc., of certain voting securities of Respondent
Ralston Purina Company and Respondents having been furnished thereafter with a copy of the draft of
Complaint that the Bureau of Competition proposed to present to the Commission for its consideration
and that, if issued by the Commission, would charge Respondents with violations of Section 7 of the
Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. § 45; and
Respondents, their attorneys, and counsel for the Commission having thereafter executed an
Agreement Containing Consent Orders ("Consent Agreement"), an admission by Respondents of all
the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the
Consent Agreement is for settlement purposes only and does not constitute an admission by Respon-
dents that the law has been violated as alleged in such Complaint, or that the facts as alleged in
Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required
Commission's Rules; and
The Commission having thereafter considered the matter and having determined that it had
reason to believe that Respondents have violated the said Acts and that a Complaint should issue
stating its charges in that respect, and having determined to accept the executed Consent Agreement
and to place such Consent Agreement on the public record for a period of thirty (30) days for the
receipt and consideration of public comments, now in further conformity with the procedure described
SNIPPETS:
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3
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THOMPSON STATEMENT
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EXTRACTED KEY WORDS
COMPETITIVENESS CHILDS MARKET BUYER ASSETS DRY CAT FOOD BRAND NESTLE PURINA CONSENT RALSTON REMEDY ABILITY PROVISIONS RELEVANT PRODUCTS HISTORICAL INDICIA REVIEW COMMISSION UNDERTOOK EXTRAORDINARILY RIGOROUS ANALYSIS PRIMARY RESERVATION TERM RE-SELL DEFEATING PURPOSE SELL ACQUIRED ASSETS OVERSIGHT PROVISIONS RESALE ASSURE ENHANCING |
Concurring Statement of Commissioner Mozelle W. Thompson
in Nestle S.A./Ralston Purina Co., File No. 011-0083
_______________________________________________________________
The Commission today has voted to accept a Consent Order that remedies
competitive concerns in the dry cat food market stemming from Nestle
S.A.'s ("Nestle") proposed acquisition of Ralston Purina Co.
("Ralston"). Pursuant to the proposed Consent Agreement and Order,
Ralston would divest its top-selling Meow Mix brand and its Alley Cat
brand to investment firm J.W. Childs Equity Partners II, L.P.
("Childs"), owners of the Hartz Mountain line of specialty pet care
products. For me, this decision was difficult because the continued
competitiveness of these brands is so important to consumers.
As always, the key issue facing the Commission in its analysis of the
proposed remedy is whether or not the remedy will restore competition
that would be lost as a result of the proposed merger. This is at its
essence a factual inquiry, involving consideration of a multitude of
factors, including the extent of the prospective buyer's industry
know-how, its financial viability, its future marketing plans, and its
capacity to research, develop, and make innovations to the relevant
products.
Our analysis here was made all the more difficult in that we were
presented with a buyer that does not have a record of experience in
the market in question, therefore, historical indicia of market
competitiveness were not available for the Commission's review. As
such, the Commission undertook an extraordinarily rigorous analysis of
Childs and its ability to be competitive with the assets in question.
Ultimately, my primary reservation was not about Childs' ability to be
competitive in the dry cat food marketplace, but rather that Childs,
as a financial buyer, might in the near term re-sell the assets in
question to a buyer who will operate the business poorly or not at
all, thus defeating the purpose of the Commission's Order.
These concerns are addressed in Section VI of the proposed Order,
which provides that Childs' will not sell the acquired assets within
five years of the date of the Order without prior approval of the
Commission. While generally I am cautious about including lengthy
oversight provisions in such orders, it is appropriate in this case
because these provisions ensure that in the event of a resale by
Childs, the Commission will be able to assure that the prospective
buyer is committed to enhancing the assets in question, thus
maintaining the integrity of the Commission's Order.
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4
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DECISION & ORDER
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EXTRACTED KEY WORDS
RALSTON COMMISSION AGREEMENT ACQUISITION DIVESTITURE TRUSTEE CONSENT NESTLE PARAGRAPH PURPOSES RALSTON ASSETS FEDERAL TRADE COMMISSION RALSTON ACQUIRER RALSTON PURINA CHILDS ACQUISITION AGREEMENT MONITOR THEREAFTER COMPETITION TRADE COMMISSION ACT RALSTON ACQUIRER INFORMATION JURISDICTIONAL FACTS NESTLE HOLDINGS RALSTON PURINA COMPANY ALLEY CAT PRODUCT SUCCESSORS OBLIGATIONS REPRESENTATIVES INTERNATIONAL TRADEMARKS INTERNATIONAL ASSETS RESPONDENTS DIVEST |
0110083
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS: Timothy J. Muris, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
Thomas B. Leary
___________________________________ )
In the matter of ))
Nestle Holdings, Inc., ) Docket No. C-4028
a corporation, and ))
Ralston Purina Company, )
a corporation. )
___________________________________ )
DECISION AND ORDER
The Federal Trade Commission ("Commission") having initiated an investigation of the pro-
posed acquisition by Respondent Nestle Holdings, Inc. of certain voting securities of Respondent
Ralston Purina Company, and Respondents having been furnished thereafter with a copy of the draft of
Complaint that the Bureau of Competition proposed to present to the Commission for its consideration
and that, if issued by the Commission, would charge Respondents with violations of Section 7 of the
Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. § 45; and
Respondents, their attorneys, and counsel for the Commission having thereafter executed an
Agreement Containing Consent Orders ("Consent Agreement"), an admission by Respondents of all
the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the
Consent Agreement is for settlement purposes only and does not constitute an admission by Respon-
dents that the law has been violated as alleged in such Complaint, or that the facts as alleged in
Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required
Commission's Rules; and
The Commission having thereafter considered the matter and having determined that it had
reason to believe that Respondents have violated the said Acts and that a Complaint should issue
stating its charges in that respect, and having thereupon issued its Complaint and its Order to
Assets and having accepted the executed Consent Agreement and placed such Consent Agreement on
the public record for a period of thirty (30) days for the receipt and consideration of public
now in further conformity with the procedure described in Commission Rule 2.34, 16 C.F.R. § 2.34,
the Commission hereby makes the following jurisdictional findings and issues the following Decision
Order ("Order"):
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5
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COMPLAINT
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EXTRACTED KEY WORDS
CAT FOOD NESTLE DRY CAT FOOD RALSTON ACT SALES RESPONDENT FEDERAL TRADE COMMISSION UNITED STATES ACQUISITION MARKET CLAYTON ACT AGREEMENT VIOLATION BUSINESS DISTRIBUTION TOTAL WORLDWIDE SALES VIRTUE TIMES RELEVANT COMMERCE PROPOSED ACQUISITION CHANNELS COMPETITION NESTLE HOLDINGS LAWS AFFILIATES ACTIVITIES AFFECTING COMMERCE MEANING MISSOURI |
011
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS: Timothy J. Muris, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
Thomas B. Leary
In the matter of
Nestle Holdings, Inc.,
a corporation,
and Docket No. C-4028
Ralston Purina Company,
a corporation.
COMPLAINT
Pursuant to the provisions of the Federal Trade Commission Act and the Clayton Act, and by virtue
of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe
Nestle Holdings, Inc. ("Nestle"), and Ralston Purina Company ("Ralston") have entered into an
agreement in violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.
§ 45, and that the terms of such agreement, were they to be implemented, would result in a
Section 5 of the Federal Trade Commission Act and Section 7 of the Clayton Act, 15 U.S.C. § 18,
and it appearing to the Commission that a proceeding in respect thereof would be in the public
hereby issues its complaint, stating its charges as follows:
I. Respondent Nestle
1. Respondent Nestle Holdings, Inc., is a corporation organized, existing and doing business under
by virtue of the laws of the State of Delaware, with its office and principal place of business
at 383 Main Avenue, Norwalk, Connecticut 06851. Nestle Holdings, Inc., is a subsidiary of, and
controlled by, Nestle S.A., a corporation organized, existing, and doing business under and by
of the laws of Switzerland, with its principal executive offices located at Avenue Nestle 55, CH-
1800 Vevey, Switzerland.
2. Respondent Nestle is, at all times relevant herein has been, among other things, engaged in the
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6
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AGREEMENT
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EXTRACTED KEY WORDS
ASSETS NESTLE CONSENT AGREEMENT CHILDS COMMISSION COMPLAINT BUSINESS RALSTON PURINA LAWS DRAFT COMPLYING NESTLE HOLDINGS RALSTON PURINA COMPANY COUNSEL VIRTUE FACTS PUBLIC RECORD ACCEPTANCE REPORTS COMMISSION RULE MANNER COMPLIANCE PROCEEDING RESPECT THERETO SERVE APPENDICES FEDERAL TRADE COMMISSION AVENUE PURSUANT |
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
___________________________________ )
In the matter of ))
Nestle Holdings, Inc., ) File No. 011-0083
a corporation, and ))
Ralston Purina Company, )
a corporation. )
___________________________________ )
AGREEMENT CONTAINING CONSENT ORDERS
The Federal Trade Commission ("Commission"), having initiated an investigation of the
proposed acquisition by Nestle Holdings, Inc. ("Nestle"), a direct wholly-owned subsidiary of Nestle
S.A., of certain assets of Ralston Purina Company ("Ralston Purina"), and it now appearing that
and Ralston Purina, hereinafter sometimes referred to as "Proposed Respondents," and Nestle S.A. are
willing to enter into this Agreement Containing Consent Orders ("Consent Agreement") to divest
assets and providing for other relief:
IT IS HEREBY AGREED by and between Proposed Respondents, Nestle S.A., and
Childs, by their duly authorized officers and attorneys, and counsel for the Commission that:
1. Proposed Respondent Nestle Holdings, Inc., is a corporation organized, existing, and doing
business under and by virtue of the laws of Delaware with its office and principal place of
business located at 383 Main Avenue, Norwalk, CT 06851.
2. Nestle S.A. is a corporation organized, existing, and doing business under and by virtue of
laws of Switzerland and, with its principal executive offices located at Avenue Nestle 55,
1800 Vevey, Switzerland.
3. Proposed Respondent Ralston Purina is a corporation organized, existing, and doing business
under and by virtue of the laws of the State of Missouri with its office and principal
business located at Checkerboard Square, St. Louis, Missouri 63164.
4. J.W. Childs Associates, Inc., ("Childs") is a corporation organized, existing, and doing
under and by virtue of the laws of the State of Delaware, with its office and principal place
business located at One Federal Street, 21st Floor, Boston, Massachusetts 02110 (as of
December 17, 2001, the principal place of business will be located at 111 Huntington Avenue,
29th Floor, Boston, Massachusetts 02199).
5. Proposed Respondents, Nestle S.A., and Childs admit all the jurisdictional facts set forth in
draft of Complaint here attached.
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7
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ANALYSIS
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EXTRACTED KEY WORDS
CONSENT ORDER CAT DIVESTITURE CAT FOOD COMMISSION NESTLE ASSETS DRY CAT FOOD MEOW CHILDS PARAGRAPH RALSTON UNITED STATES MARKET MONITOR SALES BRANDS COMPLAINT MERGER PET ALLEY CAT AGREEMENT COMPETITION PURINA SELLS MONITOR TRUSTEE CHOW APPROVALS COMPLIANCE |
011 0083
ANALYSIS OF PROPOSED
CONSENT ORDER TO AID PUBLIC COMMENT
I. Introduction
The Federal Trade Commission ("Commission") has issued a complaint ("Complaint") alleging
that the proposed merger of Nestle Holdings, Inc. ("Nestle"), and Ralston Purina Company ("Ralston")
(collectively "Proposed Respondents") would violate Section 7 of the Clayton Act, as amended, 15
U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and
has entered into an agreement containing consent orders ("Agreement Containing Consent Orders")
pursuant to which Respondents agree to be bound by a proposed consent order that requires
divestiture of certain assets ("Proposed Consent Order") and an order that requires Proposed
Respondents to maintain certain assets pending divestiture ("Asset Maintenance Order"). The
Proposed Order remedies the likely anticompetitive effects arising from Proposed Respondents'
proposed merger, as alleged in the Complaint. The Asset Maintenance Order preserves competition
pending divestiture.
II. Description of the Parties and the Transaction
Nestle Holdings, Inc., is a corporation organized, existing, and doing business under and by
virtue of the laws of the State of Delaware. This subsidiary of Nestle S.A. is the U.S.
will be purchasing all of the outstanding Ralston shares. Nestle SA, the largest food corporation
world, manufactures, distributes, and sells dairy products, soluble coffee, roast and ground coffee,
mineral water, beverages, breakfast cereals, coffee creamers, infant foods and dietetic products,
culinary products (seasonings, canned foods, pasta, sauces, etc.), frozen foods, ice cream,
products (e.g., yogurt, desserts, pasta, sauces), chocolate, food services, ophthalmological
cosmetics, and pet foods. Nestle sells its pet food products in the U.S. through its Friskies
including Alpo, Come `N Get It, Mighty Dog, Friskies, Fancy Feast, Jim Dandy, and Chef's Blend.
Nestle had worldwide sales of approximately 81.4 billion Swiss francs and United States sales of
approximately $7.8 billion for all products in 2000.
Ralston is a corporation organized, existing, and doing business under and by virtue of the
of the State of Missouri. Ralston is the world's leading producer of dry dog and dry and
foods. The brands that Ralston manufacturers, distributes, and sells include Dog Chow, Puppy Chow,
Cat Chow, Kitten Chow, Purina Special Care, Meow Mix, Purina O.N.E., Purina Pro Plan, Fit &
Trim, Clinical Nutrition Management, Alley Cat, Deli-Cat, Thrive, Tender Vittles, Happy Cat, Chuck
Wagon Stampede, and Main Stay. Ralston had worldwide sales of approximately $3 billion and
United States sales of approximately $2.36 billion for all products for fiscal year 2000.
Pursuant to a merger agreement dated January 15, 2001, Nestle agreed to purchase all of
Ralston's outstanding shares of common stock in a transaction valued at $ 10.3 billion. Nestle
to call the merged entity Nestle Purina Pet Care.
III. The Complaint
The complaint alleges that the market in which to analyze the competitive effects of the
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8
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SWINDLE STATEMENT
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EXTRACTED KEY WORDS
ASSETS COMMISSION CONSENT COMPETITION NESTLE/RALSTON PROPOSED CONSENT BUYER CONSENT AGREEMENT RALSTON DIVESTITURE NESTLE/RALSTON MERGER PRIOR APPROVAL REQUIREMENT RESELL DETERMINATION DRY CAT FOOD PARAGRAPH PROPOSED CONSENT ORDER RESOLD ASSETS PURINA COMPLAINT LESSENING MARKET REMEDY PROVISION IMPOSE PLANS PROSPECTIVE BUYER SPITE RESALE PLANS |
Concurring Statement of Commissioner Orson Swindle
in Nestle S.A./Ralston Purina Co., File No. 011-0083
_______________________________________________________________
The Commission has accepted for public comment a consent agreement to
resolve complaint allegations that the effect of Nestle S.A.'s
("Nestle") acquisition of Ralston Purina Co. ("Ralston") may be to
substantially lessen competition in the market for the sale of dry cat
food in the United States. To remedy these competitive concerns, the
merging parties have entered into a consent agreement under which
Ralston would divest its Meow Mix and Alley Cat brands to J.W. Childs
Equity Partners II, L.P. ("J.W. Childs"), an investment firm that owns
the Hartz line of pet care products. Because the divestiture to J.W.
Childs is likely to replace the competition in the market for dry cat
food that otherwise would have been lost due to the Nestle/Ralston
merger, I have voted to accept the consent agreement for public
comment.
One provision in the proposed consent agreement is unusual and may
raise concerns, however. Paragraph VI of the Proposed Consent Order
requires J.W. Childs, for a period of five years, to obtain Commission
approval before selling all or substantially all of the assets
acquired in the divestiture. The Analysis to Aid Public Comment
explains that the Commission does not routinely impose such prior
approval requirements, but it is appropriate to do so "where the
proposed acquirer's current plans indicate that there is a high
probability that the assets will be resold, possibly within 2-5
years." The purpose of the prior approval requirement is to make
certain that whoever buys the resold assets from J.W. Childs would be
a sufficient competitor to remedy the lessening of competition from
the Nestle/Ralston transaction alleged in the complaint. See Paragraph
VI.F. of the Proposed Consent Order.
I agree that J.W. Childs warranted a hard look as a prospective buyer
because it might resell the divested assets in the near future. It is
possible that this close scrutiny would go for naught if J.W. Childs
were promptly to resell the assets to a less qualified buyer. On the
other hand, this risk is always present - - even had the assets
remained in Ralston's hands. I think that our approval of J.W. Childs
as the buyer means that we have determined that, in spite of any
possible resale plans, the company will develop and employ the assets
as vigorously as Ralston would have done. Once we have made this
determination, I question the need for imposing a prior approval
requirement on J.W. Childs that we would not have imposed on a buyer
that was less likely to resell the assets.
I also think that the prior approval requirement may require that the
Commission make a difficult determination. For example, assume that
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9
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ANTHONY STATEMENT
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EXTRACTED KEY WORDS
BUSINESS PROPOSALS CHILDS COMPETITION CONSUMERS CAT FOOD BRANDS COMMISSION INVESTMENT FIRM DIVESTED ASSETS OPERATING PURCHASER FINANCIAL BUYER INDUSTRY NESTLE RALSTON PROPOSED RELIEF DRY CAT FOOD ALONE MANUFACTURING DISTRIBUTION PARTICIPANT RESTORING PLAN PET HARTZ MOUNTAIN PET CARE PRODUCTS RESTORE LOST COMPETITION PRESERVE CHOICES |
Statement of Commissioner Sheila F. Anthony
Nestle S.A. / Ralston Purina Co.
File No. 011-0083
_______________________________________________________________
Yesterday, the Commission accepted for public comment a proposed
consent agreement in this case. The evidence developed during the
Commission's investigation unequivocally demonstrates that, absent the
proposed relief, the acquisition by Nestle of Ralston would violate
the antitrust laws and likely would result in harm to consumers of dry
cat food. The parties have agreed to divest Ralston's Meow Mix and
Alley Cat brands to J.W. Childs, a private equity investment firm.
While I have concurred in the Commission's decision, I write
separately to express my concerns about some aspects of the
divestiture proposal.
The assets to be divested consist of two proven cat food brands and
little else. Standing alone, these brands do not constitute a
complete, ongoing business. Rather, J.W. Childs will have to create a
new competitor largely from whole cloth. In order to turn the divested
assets into a viable business entity, J.W. Childs will need to
develop, among other things, its own research and development program,
manufacturing facilities, distribution system, and sales and marketing
operations. Such a prospect is daunting even when the purchaser is a
participant in the same or a closely related business - which is why
divestitures of stand-alone businesses present the most successful
formula for restoring competition.
The risk to consumers is further heightened where, as here, the
proposed purchaser is a financial buyer. When compared to dedicated
industry participants, investment firms may have quite different
incentives and goals in operating a business. For example, a financial
buyer's business plan often involves selling the acquired business
within a relatively short period of time.
In the end, I am convinced that this is a rather unique situation and
that consumers will be adequately protected by the proposed relief.
Manufacturing and distribution in this industry segment is routinely
and economically contracted out through "co-packing" arrangements.
Moreover, this particular financial buyer, J.W. Childs, is financially
strong, has a proven track record of good management and growth of
acquired firms, and has some experience in the pet industry with its
Hartz Mountain line of pet care products. These factors have led me to
conclude that J.W. Childs is very likely to restore lost competition
and preserve choices for dry cat food consumers.
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