The merger of two leading producers of modified food starches, a staple ingredient of nearly every processed food product, is being investigated by antitrust enforcers at the Department of Justice.
The companies are among six of the major global players in the modified starch business. The others are Cargill Inc., Archer Daniels Midland Co. (ADM) , Tate & Lyle plc and Roquette Frères SA. Ingredion, Penford, Cargil and ADM are U.S.-based. Tate & Lyle and Roquette are based in the U.K. and France, respectively, although both have operations in the U.S.
The starch industry is highly competitive and the primary products are essentially commodities that are viewed as interchangeable from one manufacturer to another. Customers for the products include manufacturers of food and beverages, brewing, pharmaceuticals, animal nutrition and paper and corrugated products.
In fact, companies in the business compete so directly that Ingredion has included noncompete clauses in the employment contracts of Chairman and CEO Ilene Gordon and other top executives.
Despite the intense competition, the companies and their lawyers during merger negotiations considered the possibility that antitrust officials would require divestitures. On October 6 the parties discussed whether the merger agreement should include a requirement that Ingredion divest assets or otherwise agree to any business restrictions in the context of antitrust approvals. The topic was addressed again three days later. Ultimately, the parties concluded that all necessary regulatory approvals could be obtained without the imposition of unacceptable conditions. However, Ingredion secured language that shielded it from any obligation to divest its assets or to agree to any conditions affecting its operations or to defend against a DOJ lawsuit challenging the merger. It also is not required to divest any Penford asset if the spinoff would "materially diminish the expected benefits of the transaction."