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FTC Seeks to Reverse Polypore/Microporous Deal
The Commission wants to undue the deal six months after the transaction was finalized.
September 11, 2008
The Federal Trade Commission filed a complaint against Polypore International, challenging the company’s acquisition of Microporous Products. The allegations, which Polypore will likely fight, come some six months after Polypore completed the $76 million purchase.
The FTC’s David Wales, acting director of the Bureau of Competition, noted the fact that Polypore had already completed the deal was not a consideration in the Commission’s decision to contest the merger. “The lawsuit,” he said, “should send a clear message that consummation of a merger will not in any way slow or deter us from challenging transactions that raise serious antitrust issues.”
Polypore acquired Microporous through its Daramic unit, which manufactures battery separators. The transaction was small enough - at $76 million, with Microporous generating $45 million in annual sales – that it was not subject to a Hart-Scott-Rodino review.
The FTC complaint contends that the deal has resulted in higher prices in four key areas, including the markets for deep-cycle separators (used primarily in golf cart batteries); motive separators (used in forklift batteries); automotive separators; and uninterruptible power supply separators, which are used in batteries that can provide backup power. Moreover, the FTC alleges Polypore entered into an agreement with another rival, Hollingsworth & Vose, back in 2001 that prevented the company from entering the market for polyethylene battery separators.
The FTC is calling on Polypore to divest Microporous, rescind any contracts Polypore entered into following the deal, and assign all intellectual property related to the relevant markets “to a viable competitor.”
Polypore has 20 days to respond to the complaints, and an initial hearing is scheduled to take place on December 9.
Analysts covering Polypore’s stock remain uncertain about what will happen. “We are not in position to handicap an outcome from the FTC complaint,” R.W. Baird analysts wrote in a research note.
The analysts did speculate that even if the FTC succeeded in reversing the deal, Polypore’s efforts would not be completely in vein.
“While a worse-case forced sale by the FTC could prevent [Polypore] from maximizing value for Microporous, the business has residual value, which should limit any potential reduction in Polypore’s book value,” the RW Baird analysts wrote. “Should the FTC rulings prove unfavorable…we expect the appeals process could extend the time to resolution.”
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