Giant Industries defeats FTC attempt to block merger with Western Refining

Client(s) Giant Industries, Inc.

In a rare litigated merger case, Jones Day obtained clearance for its client, Giant Industries, Inc., to proceed with its merger with Western Refining, Inc. Both Giant and Western operate petroleum refineries in the Southwest United States that serve, among other areas, Albuquerque, New Mexico. The transaction, which is valued at approximately $1.4 billion, originally was announced in August 2006.

After an extensive investigation under the Hart-Scott-Rodino Act, the Federal Trade Commission sought to enjoin the transaction in the U.S. District Court in New Mexico in April 2007. Following a one-week hearing, Judge James Browning denied the FTC's request for a preliminary injunction on May 29, 2007. With the 10th Circuit denying an injunction pending appeal on May 31st, Giant and Western were able to complete their transaction. Jones Day represented Giant throughout the merger review process and litigation.

Judge Browning's decision directly refutes the FTC's theory of harm, which was that absent the merger Giant would cause gasoline prices to decline substantially in the Albuquerque area as a result of expected modest increases in gasoline supply from Giant's refineries in the Four Corners area of New Mexico and that with the merger the combined company would prevent the price decrease (and possibly even cause a price increase) in the Albuquerque area. Although the court found that Giant and Western were competitors in the supply of gasoline to Albuquerque, the court concluded that, based on the evidence brought forth by Giant and Western, the companies did not have the ability to affect market prices (either up or down) in the manner the FTC claimed. Therefore, Judge Browning concluded that the transaction was not likely to harm competition and that a preliminary injunction to block the transaction was not warranted.