On February 13, 2013, federal district court judge Emmet Sullivan denied a motion by Grupo Bimbo, S.A.B. de C.V. and Bimbo Bakeries USA, Inc. (collectively, “Bimbo”) to stay temporarily the divestiture of certain bread assets in California. On November 9, 2010, Bimbo agreed to acquire the North American Fresh Bakery business of Sara Lee Corporation. The United States Department of Justice, Antitrust Division (“DOJ”) investigated the acquisition, and concluded that it would likely substantially lessen competition for fresh sliced, bagged bread in eight geographic markets. DOJ filed suit on October 2, 2011. On February 16, 2012, with the parties’ consent, Judge Sullivan entered a final judgment, under which Bimbo agreed to divest Sara Lee bread assets in the California, Kansas City, Omaha, Oklahoma City, and Pennsylvania areas. Bimbo did not complete the sale of the California Assets within the allotted time. Accordingly, per the Final Judgment and on DOJ’s unopposed motion, Judge Sullivan appointed James A. Fishkin, of Dechert LLP, as the Divestiture Trustee charged with selling the California (and, ultimately, the Kansas City and Oklahoma City) Assets. The Divestiture Trustee entered into an agreement to sell the California Assets to Flowers Foods, Inc. (“Flowers”) on October 24, 2012, and that agreement was subsequently approved by DOJ on October 26, 2012. The sale is set to close on February 23, 2013. Flowers can terminate for any reason after May 30, 2013.
On January 29, Bimbo moved to stay the sale to Flowers. Bimbo cited the January 11 announcement that Flowers is the “stalking horse” bidder for the Hostess bread assets, which are scheduled to be sold at bankruptcy auction on February 28, 2013, and with a final approval hearing before the bankruptcy court in New York on March 5, 2013. The thrust of Bimbo’s motion was that drastically altered circumstances – namely, that Flowers allegedly stands to acquire a significant share of the California bread market if it successfully acquires both the Sara Lee and Hostess assets – at least required time for all parties (particularly DOJ) to assess whether Flowers remained an appropriate buyer for the California Assets. DOJ opposed Bimbo’s motion, arguing in part that, under a Tunney Act proceeding, a court should focus on the competitive harm alleged in the case before it, and whether the remedy will address that harm. That is, the divestiture of the California Assets would remedy the harm alleged by Bimbo’s acquisition of Sara Lee. Flowers’ potential acquisition of the Hostess assets presented a different matter that DOJ would investigate (in fact, it has already commenced its investigation) and take appropriate action if it deemed appropriate. DOJ also noted that Bimbo had other remedies available, such as filing a private action under Section 7 of the Clayton Act. Flowers intervened and argued that it is losing substantial sums of money daily in anticipation of acquiring the California Assets on February 23. At the court’s request, the Divestiture Trustee also submitted a brief setting forth his efforts to find a viable buyer for the California Assets. The Trustee noted that, if the deal with Flowers falls apart because of a delay (court-imposed or otherwise), there were no other viable buyers interested in the assets.
Judge Sullivan held a hearing the next day, on January 30, during which he set an accelerated briefing schedule. On February 13, he held a full hearing on Bimbo’s motion. Judge Sullivan orally denied Bimbo’s motion the same day. In his lengthy oral ruling (he orally delivered his opinion over the course of approximately 50 minutes), Judge Sullivan found, among other things, that Bimbo had not satisfied its burden of demonstrating a compelling need that warranted the “extraordinary relief” of relieving a party from its obligations under an agreed final judgment. He found that the harm Bimbo alleged – such as that Flowers might acquire the Hostess assets in bankruptcy; that DOJ might not require Flowers to divest Hostess assets; that a combined Flowers-Hostess entity would substantially lessen competition even though Hostess bread has been off the shelves since November, when the company went into liquidation – was simply too contingent. The Court also agreed with the Divestiture Trustee that it was highly speculative and unlikely that alternative, viable buyers might be found for the California Assets were the deal with Flowers not to close.