In a court filing Wednesday, the U.S. Department of Justice defended its decision not to factor in the closure of Verso Paper’s Bucksport mill in a review of the company’s $1.4 billion purchase of larger competitor NewPage.
In the federal antitrust review, the DOJ said it found the Bucksport mill was “less viable” than the company’s mills producing the same grade of paper in Rumford and Biron, Wisconsin.
The department required Verso to sell the Rumford and Biron mills to the Canadian Catalyst Paper Corp. as a condition of buying NewPage. It argued those divestitures were sufficient to mitigate the anticompetitive impact of Verso’s purchase on the market for coated groundwood paper, used in commercial printing, such as magazines and catalogs.
The filing comes as the DOJ seeks final court approval for terms it reached with Verso in December to allow the purchase to move forward.
Those terms were opposed by the International Association of Machinists and Aerospace Workers Local 1821, which represents 58 former employees at the mill, and by Herbert Gilley, who was laid off last year after 38 years working at the Bucksport mill.
“Since Verso has bought us we have not made a profit in eight-plus years,” Gilley wrote in an email to regulators, writing the company continued to seek and win concessions from union employees during that time. “Yet we still produced the best sheet of paper and still broke production records along with safety records, and they still couldn’t make a profit?”
The Department of Justice’s Antitrust Division, in its response to Gilley’s comments and those from attorneys for the union, wrote the department collected nearly 1 million documents from Verso and third parties; interviewed more than 100 customers, brokers and competitors; and took depositions from 12 Verso and NewPage employees.
“The department carefully reviewed evidence related to the Verso mills, including Verso’s plans relating to the Bucksport mill that pre-dated the merger and deposition testimony of senior Verso executives about the future of the Bucksport mill,” the response said. “Based on this evidence, the department concluded that Verso closed the Bucksport mill because the mill was not profitable and that the merger did not cause the mill’s closure.”
Attorneys for the union argued the federal antitrust review too narrowly was focused on Verso’s recent actions and did not consider what attorneys described as a longer term effort by hedge fund owner Apollo Global Management to eliminate paper production capacity.
“This myopic 2014-centric focus on events and actions failed to put this merger in a realistic (and accurate) competitive context,” Kim Tucker, attorney for the union, wrote.
She argued Verso’s hedge fund owner, Apollo Global Management, had since NewPage’s bankruptcy sought such a merger and used influence as a holder of NewPage debt to try to make that happen.
The Department of Justice in its response wrote those claims were outside its authority in reviewing the merger under the Tunney Act and would need to be part of a separate action related to alleged violations of the Sherman Antitrust Act of 1890.
The union separately pursued those claims in a lawsuit in federal court in Maine, seeking to halt Verso’s $58 million sale of the Bucksport mill to Canadian scrap metal dealer American Iron & Metal.
It lost that fight and did not get permission to itself probe more deeply into Verso’s internal documents in an effort to prove improper collusion between Verso and NewPage before the merger.
It also hoped to probe whether there were higher and credible bids from other potential papermakers before the sale to AIM, an allegation raised by Gov. Paul LePage’s administration.
Three buyers expressed possible interest in the Bucksport property in the wake of the political and legal fight over the mill’s closure, but one such statement of interest was not authorized and official bidders after the shutdown reportedly signed confidentiality agreements.
AIM officials have not said what the company will do with the 250-acre riverfront site once the former mill is demolished. Previously they suggested it was likely they would try to redevelop it, as they are doing with another former Verso mill in in Sartell, Minnesota.
With the published comments and response, a federal judge will decide whether to approve the settlement terms reached by Verso and the DOJ over the NewPage purchase.
If U.S. District Court Judge Tanya S. Chutkan of the District of Columbia finds the settlement in conflict with the public interest, she could order modifications to the terms, which then could be fought in court.