Judge denies motion to delay Bimbo divestiture
WASHINGTON — U.S. District Judge Emmet G. Sullivan on Feb. 13 denied a motion filed by Grupo Bimbo S.A.B. de C.V. in late January that would have temporarily suspended Flowers Foods, Inc.’s pending acquisition of the Sara Lee and Earthgrain brands in California from Grupo Bimbo S.A.B. de C.V. The acquisition now will proceed as planned, with portions of the transaction scheduled to close by Feb. 23 and the entire closing expected to be finalized by the end of May.
The U.S. Department of Justice in October 2012 approved the transaction, which would give Flowers Foods perpetual, exclusive and royalty-free licenses to the Sara Lee and Earthgrains brands for sliced bread, buns and rolls in California, a business with annual sales of about $134 million.
The recent action to liquidate Hostess Brands, Inc.’s bread businesses — with a significant portion potentially going to Flowers — led Grupo Bimbo to file a motion in the U.S. District Court for the District of Columbia on Jan. 29 requesting a suspension of the transaction involving the brands in California.
“The competitive landscape of the United States bread industry has undergone dramatic changes in the past three weeks,” Grupo Bimbo said in the filing, noting the combination of Hostess, Bimbo’s divestiture assets, and Flowers’ pre-existing assets “would give the buyer dominance in certain types of bread, fundamentally altering competition in the sale of bread in California and nationwide.”
“Because this result would contradict the (modified final judgment’s) instruction that ‘competition (not be) substantially lessened’ due to the divestiture, Bimbo here seeks a temporary suspension of the divestiture to allow the court and the parties to assess whether such divestiture is appropriate,” Grupo Bimbo said.
But in a Feb. 8 filing, the D.O.J. said the changed circumstance does not alter the original antitrust issues that were raised when Grupo Bimbo agreed to acquire the fresh bakery business of Sara Lee in November 2010. In October 2011, Grupo Bimbo reached an agreement with the Department of Justice under which the company would divest certain brands and related assets and routes in specified markets. That mandate has not changed, the D.O.J. said.
The D.O.J. said the potential Flowers-Hostess transaction “is beyond the scope of this proceeding,” adding that Flowers’ acquisition of Hostess’ bread assets is being investigated by the Antitrust Division, “which will take appropriate action — including challenging the acquisition, if appropriate.”