Justice Department files antitrust lawsuit against Parker Hannifin over its $4.3 billion Clarcor Inc. takeover

The U.S. Justice Department is challenging Parker Hannifin Corp.’s (NYSE: PH) $4.3 billion purchase of Clarcor Inc. (NYSE: CLC)

In an announcement on its website on Tuesday afternoon, Sept. 26, the department said the deal “substantially lessened competition in markets for aviation fuel filtration products in the United States, which threatens to result in higher prices, less innovation and less favorable terms of service.”

The department has filed a civil lawsuit in U.S. district court in Delaware. The lawsuit “seeks to restore the competition that this transaction eliminated” by asking the court to order Parker Hannifin “to divest an aviation fuel filtration business sufficient to replace Clarcor’s competitive significance in the marketplace,” the department said in the announcement.

“Parker Hannifin bought Clarcor knowing that this transaction raised serious antitrust concerns under Section 7 of the Clayton Act in the development, manufacture and sale of aviation fuel filtration products,” said deputy assistant attorney general Donald Kempf, of the department Antitrust Division, in a statement.

Acting assistant attorney general Andrew Finch of the Antitrust Division added, “Parker Hannifin’s acquisition of its only U.S. rival for these types of aviation fuel filtration products has effectively created a monopoly in these critical safety products, depriving their customers of the benefits of competition.”

Parker said in a statement that the “estimated combined annual revenue attributable to Parker’s and Clarcor’s U.S. qualified aviation ground fuel filtration elements under inquiry is less than $20 million.”

The company said “no second request for information was made prior to the expiration of the customary waiting period” in the deal process. Parker “has cooperated fully with the DOJ throughout this process and has been working diligently to respond to their post-closing inquiry,” according to the statement. Parker said it is “reviewing the complaint and looks forward to the ultimate resolution of this matter.”

 

Parker, a maker of motion and control systems for industrial and aerospace markets, and Clarcor, an air filtration systems maker, “were the only two manufacturers of (Energy Institute)-qualified aviation fuel filtration systems and filter elements in the United States and were engaged in vigorous head-to-head competition,” the justice department said in its announcement. “That competition enabled customers to negotiate better pricing and to receive more innovative products and better terms of service. The transaction eliminated this competition.”

The department said during its investigation of the proposed deal, Parker “failed to provide significant document or data productions in response to the department’s requests. In addition, the company has not agreed to enter into a satisfactory agreement to hold separate the fuel filtration businesses at issue and to maintain their independent viability pending the outcome of the investigation and, now, this litigation.”

Parker announced the Clarcor deal on Dec. 1, 2016, and completed it on Feb. 28.

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