DOJ Challenges Post-Closing Parker Hannifin, Clarcor Merger

What to Know About Post-Closing Merger Challenges
– Law360

Law360 interviewed Manatt’s Lisl Dunlop, co-chair of the firm’s antitrust and competition practice, for insights into the U.S. Department of Justice’s challenge of a previously reviewed merger that had already closed. The DOJ sued Parker Hannifin Corp. in Delaware federal court over its $4.3 billion acquisition of rival Clarcor Inc., saying the finalized merger combined the only two domestic companies making aviation fuel filtration systems used by the military and airlines.
 
According to experts, this case is rare because the companies had notified the DOJ when the deal was inked and seemed to have complied with Hart-Scott-Rodino Act requirements. A source close to the Parker Hannifin investigation told Law360 that the DOJ challenge—which came approximately six months after the deal was closed—was prompted by customer complaints, which Dunlop said could be a logical explanation.
 
“Obviously, something happened to cause the DOJ to look at it more closely, because if it had been apparent from the materials that they received with their initial look at it back in January, then they would have issued a second request to give themselves more time to investigate,” explained Dunlop. “A second request doesn’t mean there’s a problem, it just means that they need more time.”
 
The DOJ’s complaint involves emails from a Parker Hannifin executive that suggest company executives were aware of potential competition issues. Dunlop acknowledged that the communications were not ideal, but said she didn’t believe the DOJ would be able to win a case based on that type of evidence alone.
 
“This is why we advise people not to write that kind of stuff,” Dunlop said. “It’s unfortunate that someone fairly senior in the company felt that they wanted to basically do some legal antitrust analysis in a nonprivileged email. But, having said that, it doesn’t say that much.”