Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC conditionally approves combination of Emerson and Pentair, (Apr 28, 2017)

By Jeffrey May, J.D.

Emerson Electric Company, a diversified global manufacturing company, can proceed with its proposed $3.15 billion acquisition of Pentair plc, under the terms of a proposed FTC consent order. To resolve the agency's competition concerns that the transaction would combine the two largest suppliers of switchboxes, the consent order would require Emerson to divest Pentair’s switchbox manufacturer subsidiary, Westlock Controls Corporation. Crane Co. is the designated buyer of the divestiture assets (In the Matter of Emerson Electric Co., FTC Dkt. C-4615, File No. 161-0221).

According to the FTC, U.S.-based Emerson is a leading manufacturer of industrial equipment and instrumentation, including valves, actuators, regulators, and switchboxes, which it sells to customers in, among others, the oil and gas, refining, chemical, and power generation industries. Pentair, headquartered in the United Kingdom, is a global water, fluid, thermal management, and equipment protection company. The Pentair Valves & Controls business manufactures valves, fittings, actuators, and controls, including switchboxes, for a broad array of industrial markets.

The relevant product market for purposing of analyzing the transaction is switchboxes. The agency explained that switchboxes are "devices that monitor and control isolation (or "on/off") valves, which control the flow of liquids or gases through pipes in industrial applications, including the oil and gas, chemical, petrochemical, and power generation industries." Pentair and Emerson have a combined market share of approximately 60% in this market. By eliminating competition between Emerson and Pentair, the acquisition likely would produce unilateral effects in the form of higher prices and reduced innovation, the FTC alleged.

Under the terms of the proposed consent order, within 10 days after Emerson acquires Pentair, Emerson must divest Westlock Controls Corporation to Crane, which the FTC identifies as a significant competitor in the U.S. industrial valves market. The order also would require Emerson to provide Crane all of Westlock’s production facilities, intellectual property, confidential business information, and the opportunity to hire Westlock employees.

Attorneys: Abbott B. Lipsky, Jr. for FTC. Michael N. Sohn (Davis Polk & Wardwell LLP) for Emerson Electric Co. Gregory E. Neppl (Foley & Lardner LLP) for Pentair plc.

Companies: Emerson Electric Co.; Pentair plc; Westlock Controls Corp.; Crane Co.

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