Giant Industries Hits Roadblock for Acquisition

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Giant Industries Hits Roadblock for Acquisition

SCOTTSDALE, Ariz. -- Giant Industries Inc., and Western Refining Inc., plan to vigorously challenge in court a recent U.S. Federal Trade Commission (FTC) rejection of the two companies' planned merger.

Earlier this week, federal regulators said they would seek a temporary restraining order and preliminary injunction to stop Western Refining's $1.13 billion acquisition of its rival, Giant Industries, The Associated Press reported.

In its statement, the FTC said that such a purchase would result in reduced competition for the bulk supply of light petroleum products, including gasoline, in northern New Mexico, the report stated.

"Western's acquisition of Giant would eliminate this competition, leading to higher prices for consumers of these important energy products," Jeffrey Schmidt, director of the FTC's Bureau of Competition, said in a written statement.

A formal complaint will be filed by the end of the week in the U.S. District Court for the District of New Mexico, according to the FTC.

Western Refining and Giant described the FTC’s decision as being "without basis in fact or law," adding that a hearing schedule for the matter will be decided in a number of days.

"This merger will result in more product being provided to the combined companies' customers and is, therefore, pro-competitive,” Western President and CEO Paul Foster said in a written statement. "The FTC's decision demonstrates a fundamental and troubling lack of understanding about the areas in which Western Refining and Giant operate, the competitors in those areas and the competitive nature of those areas. The FTC's position is entirely without basis, and we look forward to proving our case before an objective and knowledgeable court."

The merger of the two companies would result in a less than 1.5 percent stake in the U.S. refining capacity, according to Giant chairman and CEO, Fred Hollinger. "We are disappointed that the FTC has chosen to oppose the merger of two small companies … Over the past several years, mergers and acquisitions of refineries have created refining companies that dwarf our size and they have been allowed by the FTC. The employees of both companies have spent countless hours preparing documents in response to the FTC's information requests and we and our advisers haven't seen anything that we believe would serve as a basis for the FTC to oppose this merger. We continue to believe that the merger is in the best interest of our shareholders, our employees and our customers."

Western agreed to buy Giant in August for $83 per share, totaling $1.5 billion, including $280 million in assumed debt. In November, Western dropped its bid to $77 per share due to Giant's poor financial performance after fires temporarily disabled two refineries, the AP reported.