DOJ Requires Sale of Freight Car Business Without Upfront Buyer

On October 26, 2016, the DOJ announced that it will require Westinghouse Air Brake Technologies Corporation (“Wabtec”) to divest Faiveley Transport North America’s (“Faiveley”) entire U.S. freight car brakes business in order for Wabtec to proceed with its proposed approximately $1.8 billion acquisition of Faiveley Transport S.A. and Faiveley Transport North America.

The acquisition as originally proposed would have eliminated Faiveley as one of only three major companies that supplies freight car brake components in the United States and eliminated Faiveley as a pipeline competitor in the development, manufacture and sale of freight car control valves – essentially freezing a century-old duopoly in that market.

The proposed settlement includes a divestiture of Faiveley’s entire U.S. freight car brakes business which develops, manufactures and sells freight car brake systems and components including: air brake control valves, hand brakes, slack adjusters, truck-mounted brake assemblies, empty load devices and brake cylinders.  The divestiture also includes Faiveley’s FTEN control valve, a freight car brake control valve under development that will be available for full commercialization after approval from the Association of American Railroads. The DOJ required the sale to be made to a single buyer to be approved by the Antitrust Division.

Lesson Learned:

The DOJ has a preference of structural remedies to resolve horizontal competition problems.  Keeping in line with past practices, the DOJ required a divestiture of a business rather than a package of assets.  Because the divestiture proposed was for a an entire business, the DOJ did not require an upfront buyer.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com