Victory for U.S. Sugar- Antitrust Arguments Rejected in Deal
TALLAHASSEE — An appeals court Thursday rejected an attempt by federal antitrust officials to block U.S. Sugar Corp. from buying another player in the sugar industry.
A three-judge panel of the 3rd U.S. Circuit Court of Appeals upheld a district judge’s decision that cleared the way for Clewiston-based U.S. Sugar to purchase Imperial Sugar Co.
U.S. Sugar, long influential in Florida government and politics, announced in March 2021 that it had reached an agreement to purchase Imperial Sugar from the Netherlands-based Louis Dreyfus Co. A key to the purchase was an Imperial Sugar refinery at Port Wentworth, Ga.
The U.S. Department of Justice filed an antitrust lawsuit in 2021, arguing, in part, that the combination of the companies would hurt customers in the Southeast United States. Delaware-based U.S. District Judge Maryellen Noreika in September 2022 rejected the antitrust arguments.
Thursday’s 19-page decision by the Philadelphia-based appeals court outlined a system in which refiners, such as U.S. Sugar, sell sugar to distributors. It said, in part, distributors can buy sugar from numerous sources, including foreign competitors of U.S. Sugar, which helps provide a check on prices and market power.
As the appeal played out, U.S. Sugar said in a November 2022 court filing that it had completed a $315 million purchase of the assets of Imperial Sugar.
In a brief filed last year, U.S. Sugar described the Georgia facility as relying on old equipment and operating below capacity. U.S. Sugar indicated it planned to upgrade the facility and use it to refine more of the sugarcane that U.S. Sugar grows.
Thursday’s ruling, written by Judge David Porter and joined by Judges Thomas Ambro and Arianna Freeman, said Imperial Sugar “has been in financial distress for years.”
“It went bankrupt in 2001 and suffered a costly accident at its plant in 2008, prompting its owners to put it up for sale,” the ruling said. “Purchased by the Louis Dreyfus Company, Imperial has since received from Louis Dreyfus only a subsistence level of investment to keep its operation safe and environmentally sound. Imperial’s internal reports describe it as an ‘import-based, price-uncompetitive sugar refinery’ that is ‘structurally uncompetitive’ and suffers from a shrinking customer base, losing roughly 10 percent of its customers from 2021 to 2022. For more than five years, Louis Dreyfus has been trying to sell it.”
But the Justice Department alleged the deal violated an antitrust law known as the Clayton Act.
“The merger at issue, in this case, involves a leading Florida-based sugar refiner’s acquisition of its major rival’s Georgia-based refinery,” Justice Department attorneys wrote in a Nov. 1 brief.
“As the government has established, the merger threatens precisely the harm that (a section of the Clayton Act) proscribes: substantially lessening competition in the market for the production and sale of refined sugar.”
In a Nov. 21 brief, however, U.S. Sugar said that during a district-court trial the Justice Department “presented overly narrow and inconsistent product and geographic markets in an attempt to distort the competitive impact of United States Sugar Corporation’s acquisition of Imperial Sugar Company.”
In a statement Thursday, U.S. Sugar said it was pleased that the appeals court “upheld the lower court’s decision which allowed U.S. Sugar to complete our acquisition of Imperial Sugar’s Savannah Refinery. We continue to focus our efforts on the integration of our sugar businesses. As we have previously stated, bringing the Savannah Refinery, its sugar brands and facilities back into American ownership is good for our employees, our local communities, our customers and our country.”
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