Praxair, Inc.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 961 0017]

Praxair, Inc.; Proposed Consent Agreement With Analysis to Aid

Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: This Consent Agreement, accepted subject to final Commission

approval, settles alleged violations of federal law prohibiting unfair

or deceptive acts and practices and unfair methods of competition

arising from the acquisition of CBI Industries, Inc. by Praxair, Inc.

Under the terms of the proposed order contained in the Consent

Agreement, Praxair, among other things, must divest all of the assets

and businesses relating to four CBI plants that produce atmospheric

gases--located in Vacaville, California; Irwindale, California; Bozrah,

Connecticut; and Madison, Wisconsin--to an acquirer or acquirers

approved by the Commission. If Praxair fails to divest these assets

within 12 months after the order becomes final, a trustee may be

appointed to divest the four plants. The Consent Agreement also

requires Praxair to take all steps necessary to ensure that the plants

to be divested continue as ongoing, viable and competitive operations,

by complying with an Agreement to Hold Separate.

DATES: Comments must be received on or before March 22, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: James H. Holden, Jr., FTC/S-2023,

Washington, D.C. 20580 (202) 326-2682; or Christina Perez, FTC/S-2214,

Washington, D.C. 20580 (202) 326-2682.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the following consent agreement containing a consent order

to cease and desist, having been filed with and accepted, subject to

final approval, by the Commission, has been placed on the public record

for a period of sixty (60) days. Public comment is invited. Such

comments or views will be considered by the Commission and will be

available for inspection and copying at its principal office in

accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii)).

[[Page 1574]]

The Federal Trade Commission (``Commission''), having initiated an

investigation of the proposed acquisition by Praxair, Inc.

(``Praxair'') of CBI Industries, Inc. (``CBI''), and it now appearing

that Praxair, hereinafter sometimes referred to as ``Proposed

Respondent,'' is willing to enter into an agreement containing an order

to divest assets, and providing for certain other relief:

It is hereby agreed by and between Proposed Respondent Praxair, by

its duly authorized officers and attorneys, and counsel for the

Commission that:

1. Proposed Respondent Praxair is a corporation organized,

existing, and doing business under and by virtue of the laws of the

state of Delaware with its principal executive offices located at 39

Old Ridgebury Road, Danbury, Connecticut 06810-5113.

2. Proposed Respondent admits all the jurisdictional facts set

forth in the draft of complaint here attached.

3. Proposed Respondent waives:

a. any further procedural steps;

b. the requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

c. all rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement;

and

d. any claims under the Equal Access to Justice Act.

4. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify the Proposed Respondent, in which event

it will take such action as it may consider appropriate, or issue and

serve its complaint (in such form as the circumstances may require) and

decision, in disposition of the proceeding.

5.This agreement is for settlement purposes only and does not

constitute an admission by Proposed Respondent that the law has been

violated as alleged in the draft of complaint here attached, or that

the facts as alleged in the draft complaint, other than jurisdictional

facts, are true.

6. This agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Section 2.34 of the

Commission's Rules, the Commission may, without further notice to

Proposed Respondent, (1) issue its complaint corresponding in form and

substance with the draft of complaint here attached and its decision

containing the following order to divest in disposition of the

proceeding, and (2) make information public with respect thereto. When

so entered, the order shall have the same force and effect and may be

altered, modified, or set aside in the same manner and within the same

time provided by statute for other orders. The order shall become final

upon service. Delivery by the U.S. Postal Service of the complaint and

decision containing the agreed-to order to Proposed Respondent shall

constitute service. Proposed Respondent waives any right it may have to

any other manner of service. The complaint may be used in construing

the terms of the order, and no agreement, understanding,

representation, or interpretation not contained in the order or the

agreement may be used to vary or contradict the terms of the order.

7. Proposed Respondent has read the proposed complaint and order

contemplated hereby. Proposed Respondent understands that once the

order has been issued, it will be required to file one or more

compliance reports showing that it has fully complied with the order.

Proposed Respondent further understands it may be liable for civil

penalties in the amount provided by law for each violation of the order

after it becomes final. By signing this Agreement, Proposed Respondent

represents that the relief contemplated by this Agreement can be

accomplished.

Order

I

It is ordered that, as used in this order, the following

definitions shall apply:

A. ``Respondent'' or ``Praxair'' means Praxair, Inc., its

directors, officers, employees, agents and representatives,

predecessors, successors and assigns; its subsidiaries, divisions, and

groups and affiliates controlled by Praxair, Inc., and the respective

directors, officers, employees, agents, and representatives,

successors, and assigns of each.

B. ``CBI'' means CBI Industries, Inc., its directors, officers,

employees, agents and representatives, predecessors, successors and

assigns; its subsidiaries, divisions, and groups and affiliates

controlled by CBI, and the respective directors, officers, employees,

agents, and representatives, successors, and assigns of each.

C. ``Commission'' means the Federal Trade Commission.

D. ``Acquisition'' means Praxair's acquisition of issued and

outstanding common shares of CBI, pursuant to a cash tender offer dated

November 3, 1995.

E. ``Merchant Atmospheric Gases'' means oxygen, nitrogen and argon

sold in liquid form or packaged in cylinders.

F. ``Atmospheric Gases Plant'' means a facility that produces

Merchant Atmospheric Gases.

G. ``Merchant Divestiture Assets and Businesses'' means, the

Vacaville Plant, Irwindale Plant, Bozrah Plant, and Madison Plant,

whether divested individually or in some combination, including the

assets, properties, business and goodwill, tangible and intangible,

used in the manufacture and sale of merchant atmospheric gases at those

plants, including, without limitation, the following:

1. all real property interests, including rights, title and

interest in and to owned or leased property, together with all

buildings, improvements, appurtenances, licenses and permits;

2. all machinery, fixtures, equipment, vehicles, transportation

facilities, furniture, tools and other tangible personal property,

including distribution equipment and cylinders;

3. all customer lists, vendor lists, catalogs, sales promotion

literature, advertising materials, research materials, technical

information, management information systems, software, software

licenses, inventions, patents, technology, know-how, specifications,

designs, drawings, processes and quality control data;

4. rights to and in contracts, including customer, dealer,

distributor, supply and utility contracts;

5. inventory, supplies and storage capacity, including storage

vessels;

6. all rights under warranties and guarantees, express or implied;

7. all books, records, and files; and

8. all items of prepaid expense.

H. ``Vacaville Plant'' means CBI's Atmospheric Gases Plant located

in Vacaville, California, together with all associated Merchant

Divestiture Assets and Businesses.

I. ``Irwindale Plant'' means CBI's Atmospheric Gases Plant located

in Irwindale, California, together with all associated Merchant

Divestiture Assets and Businesses.

J. ``Bozrah Plant'' means CBI's Atmospheric Gases Plant located in

Bozrah, Connecticut, together with all associated Merchant Divestiture

Assets and Businesses.

[[Page 1575]]

K. ``Madison Plant'' means CBI's Atmospheric Gases Plant located in

Madison, Wisconsin, together with all associated Merchant Divestiture

Assets and Businesses.

II

It is further ordered, That:

A. Praxair shall divest, absolutely and in good faith, within

twelve (12) months of the date this order becomes final, the Merchant

Divestiture Assets and Businesses, and shall also divest such

additional ancillary CBI assets and effect such arrangements as are

necessary to assure the marketability, viability and competitiveness of

the Merchant Divestiture Assets and Businesses.

B. Praxair shall divest the Merchant Divestiture Assets and

Businesses, either individually or in some combination, only to an

acquirer or acquirers that receive the prior approval of the Commission

and only in a manner that receives the prior approval of the

Commission. The purpose of the divestiture is to ensure the

continuation of the Merchant Divestiture Assets and Businesses as an

ongoing, viable operation or operations, engaged in the same business

in which the Merchant Divestiture Assets and Businesses are engaged at

the time of the proposed divestiture, and to remedy the lessening of

competition resulting from the proposed acquisition as alleged in the

Commission's complaint.

C. Pending divestiture of the Merchant Divestiture Assets and

Businesses, Praxair shall take such actions as are necessary to

maintain the viability, marketability, and competitiveness of the

Merchant Divestiture Assets and Businesses, and to prevent the

destruction, removal, wasting, deterioration or impairment of the

Merchant Divestiture Assets and Businesses except for ordinary wear and

tear.

D. Praxair shall comply with all terms of the Agreement to Hold

Separate attached to this order and made a part hereof as Appendix I.

The Agreement to Hold Separate shall continue in effect until such time

as respondent has divested all of the Merchant Divestiture Assets and

Businesses as required by this order.

III

It is further ordered, That:

A. If Praxair has not divested, absolutely and in good faith, and

with the prior approval of the Commission, the Merchant Divestiture

Assets and Businesses within twelve (12) months of the date this order

becomes final, the Commission may appoint a trustee to divest the

Merchant Divestiture Assets and Businesses. In the event that the

Commission or the Attorney General brings an action pursuant to

Sec. 5(l) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(l), or

any other statute enforced by the Commission, Praxair shall consent to

the appointment of a trustee in such action. Neither the appointment of

a trustee nor a decision not to appoint a trustee under this Paragraph

III shall preclude the Commission or the Attorney General from seeking

civil penalties or any other relief available to it, including a court-

appointed trustee, pursuant to Sec. 5(l) of the Federal Trade

Commission Act, or any other statute enforced by the Commission, for

any failure by Praxair to comply with this order.

B. If a trustee is appointed by the Commission or a court pursuant

to Paragraph III.A., Praxair shall consent to the following terms and

conditions regarding the trustee's powers, duties, authority, and

responsibilities:

1. The Commission shall select the trustee, subject to the consent

of Praxair, which consent shall not be unreasonably withheld. The

trustee shall be a person with experience and expertise in acquisitions

and divestitures. If Praxair has not opposed, in writing, including the

reasons for opposing, the selection of any proposed trustee within ten

(10) days after notice by the staff of the Commission to Praxair of the

identity of any proposed trustee, Praxair shall be deemed to have

consented to the selection of the proposed trustee.

2. Subject to the prior approval of the Commission, the trustee

shall have the exclusive power and authority to divest the Merchant

Divestiture Assets and Businesses.

3. Within ten (10) days after appointment of the trustee, Praxair

shall execute a trust agreement that, subject to the prior approval of

the Commission and, in the case of a court-appointed trustee, of the

court, transfers to the trustee all rights and powers necessary to

permit the trustee to effect the divestiture(s) required by this order.

4. The trustee shall have twelve (12) months from the date the

Commission approves the trust agreement described in Paragraph III.B.3.

to accomplish the divestiture(s), which shall be subject to the prior

approval of the Commission. If, however, at the end of the twelve month

period, the trustee has submitted a plan of divestiture or believes

that divestiture can be achieved within a reasonable time, the

divestiture period may be extended by the Commission, or, in the case

of a court-appointed trustee, by the court; provided, however, the

Commission may extend this period only two (2) times.

5. The trustee shall have full and complete access to the

personnel, books, records and facilities related to the Merchant

Divestiture Assets and Businesses, or to any other relevant

information, as the trustee may request. Praxair shall develop such

financial or other information as the trustee may request and shall

cooperate with the trustee. Praxair shall take no action to interfere

with or impede the trustee's accomplishment of the divestiture(s). Any

delays in divestiture caused by Praxair shall extend the time for

divestiture under this Paragraph in an amount equal to the delay, as

determined by the Commission or, for a court-appointed trustee, by the

court.

6. The trustee shall use his or her best efforts to negotiate the

most favorable price and terms available in each contract that is

submitted to the Commission, subject to Praxair's absolute and

unconditional obligation to divest at no minimum price. The

divestiture(s) shall be made in the manner and to the acquirer or

acquirers as set out in Paragraph II of this order, provided, however,

if the trustee receives bona fide offers for any of the plants to be

divested from more than one acquiring entity, and if the Commission

determines to approve more than one such acquiring entity, the trustee

shall divest that particular plant to the acquiring entity or entities

selected by Praxair from among those approved by the Commission.

7. The trustee shall serve at the cost and expense of Praxair,

without bond or other security unless paid for by Praxair, on such

reasonable and customary terms and conditions as the Commission or a

court may set. The trustee shall have the authority to employ, at the

cost and expense of Praxair, such consultants, accountants, attorneys,

investment bankers, business brokers, appraisers, and other

representatives and assistants as are necessary to carry out the

trustee's duties and responsibilities. The trustee shall account for

all monies derived from the divestiture and all expenses incurred.

After approval by the Commission and, in the case of a court-appointed

trustee, by the court, of the account of the trustee, including fees

for his or her services, all remaining monies shall be paid at the

direction of Praxair, and the trustee's power shall be terminated. The

trustee's compensation shall be based at least in significant part on a

commission arrangement contingent on the trustee's divesting the

Merchant Divestiture Assets and Businesses.

[[Page 1576]]

8. Praxair shall indemnify the trustee and hold the trustee

harmless against any losses, claims, damages, liabilities, or expenses

arising out of, or in connection with, the performance of the trustee's

duties, including all reasonable fees of counsel and other expenses

incurred in connection with the preparation for, or defense of any

claim, whether or not resulting in any liability, except to the extent

that such liabilities, losses, damages, claims, or expenses result from

misfeasance, gross negligence, willful or wanton acts, or bad faith by

the trustee.

9. If the trustee ceases to act or fails to act diligently, a

substitute trustee shall be appointed in the same manner as provided in

Paragraph III.A. of this order.

10. The Commission or, in the case of a court-appointed trustee,

the court, may on its own initiative or at the request of the trustee

issue such additional orders or directions as may be necessary or

appropriate to accomplish the divestiture required by this order.

11. The trustee shall have no obligation or authority to operate or

maintain the Merchant Divestiture Assets and Businesses.

12. In the event that the trustee determines that he or she is

unable to divest the Merchant Divestiture Assets and Businesses in a

manner consistent with the Commission's purpose as described in

Paragraph II, the trustee may divest additional ancillary CBI assets of

Praxair and effect such arrangements as are necessary to satisfy the

requirements of this order.

13. The trustee shall report in writing to Praxair and the

Commission every sixty (60) days concerning the trustee's efforts to

accomplish divestiture.

IV

It is further ordered that within sixty (60) days after the date

this order becomes final and every sixty (60) days thereafter until

Praxair has fully complied with Paragraphs II and III of this order,

Praxair shall submit to the Commission a verified written report

setting forth in detail the manner and form in which it intends to

comply, is complying, and has complied with Paragraphs II and III of

this order. Praxair shall include in its compliance reports, among

other things that are required from time to time, a full description of

the efforts being made to comply with Paragraphs II and III including a

description of all substantive contacts or negotiations for the

divestiture(s) required by this order, including the identity of all

parties contacted. Praxair shall include in its compliance reports

copies of all written communications to and from such parties, all

internal memoranda, and all reports and recommendations concerning the

divestiture(s).

V

It is further ordered that, for the purpose of determining or

securing compliance with this order, Praxair shall permit any duly

authorized representatives of the Commission:

A. Access, during office hours and in the presence of counsel, to

inspect and copy all books, ledgers, accounts, correspondence,

memoranda and other records and documents in the possession or under

the control of Praxair, relating to any matters contained in this

order; and

B. Upon five (5) days' notice to Praxair, and without restraint or

interference from Praxair, to interview officers, directors, or

employees of Praxair, who may have counsel present, regarding any such

matters.

VI

It is further ordered that until Praxair has completed all of its

obligations under this order, Praxair shall notify the Commission at

least thirty (30) days prior to any proposed change in the Respondent

such as dissolution, assignment, sale resulting in the emergence of a

successor corporation, or the creation or dissolution of subsidiaries

or any other change in the corporation that may affect compliance

obligations arising out of the order.

VII

It is further ordered that Respondent shall not be obligated to

comply with this Order if Praxair abandons the proposed acquisition of

CBI. For purposes of this Order, Praxair will be deemed to have

abandoned the proposed acquisition of CBI after it provides written

notice to the Commission that it has abandoned its proposed acquisition

and has withdrawn any related notifications filed pursuant to Section

7A of the Clayton Act, as amended, 15 U.S.C. 18a.

Appendix I

Agreement to Hold Separate

This Agreement to Hold Separate (``Hold Separate'') is by and

between Praxair, Inc. (``Praxair''), a corporation organized, existing,

and doing business under and by virtue of the laws of the state of

Delaware, and the Federal Trade Commission (``Commission''), an

independent agency of the United States Government, established under

the Federal Trade Commission Act of 1914, 15 U.S.C. 41, et seq.

(collectively, the ``Parties'').

Premises

Whereas, on November 3, 1995, Praxair offered to purchase all of

the outstanding common shares of CBI Industries, Inc. (``CBI''); and

Whereas, CBI, with its principal office and place of business

located at 800 Jorie Boulevard, Oak Brook, Illinois 60521-2268,

manufactures and markets, among other things, Merchant Atmospheric

Gases; and

Whereas, Praxair, with its principal office and place of business

located at 39 Old Ridgebury Road, Danbury, Connecticut 06810-5113,

manufactures and markets, among other things, Merchant Atmospheric

Gases; and

Whereas, the Commission is now investigating the Acquisition to

determine whether it would violate any of the statutes enforced by the

Commission; and

Whereas, if the Commission accepts the Agreement Containing Consent

Order (``Consent Agreement''), the Commission must place it on the

public record for a period of at least sixty (60) days and may

subsequently withdraw such acceptance pursuant to the provisions of

Section 2.34 of the Commission's Rules; and

Whereas, the Commission is concerned that if an understanding is

not reached, preserving the status quo ante of the Merchant Divestiture

Assets and Businesses, as defined in Paragraph I.G. of the Consent

Agreement, during the period prior to the final acceptance and issuance

of the Consent Agreement by the Commission (after the 60-day public

comment period), divestiture resulting from any proceeding challenging

the legality of the Acquisition might not be possible, or might be less

than an effective remedy; and

Whereas, the Commission is concerned that if the Acquisition is

consummated, it will be necessary to preserve the Commission's ability

to require the divestiture of the Merchant Divestiture Assets and

Businesses and the Commission's right to have the Merchant Divestiture

Assets and Businesses continue as viable competitors; and

Whereas, the purposes of this Hold Separate and the Consent

Agreement are:

A. to preserve the Merchant Divestiture Assets and Businesses as

viable, competitive, and independent businesses pending divestiture of

the Merchant Divestiture Assets and Businesses, and

[[Page 1577]]

B. to remedy any anticompetitive effects of the Acquisition; and

Whereas, Praxair's entering into this Hold Separate shall in no way

be construed as an admission by Praxair that the Acquisition is

illegal; and

Whereas, Praxair understands that no act or transaction

contemplated by this Hold Separate shall be deemed immune or exempt

from the provisions of the antitrust laws or the Federal Trade

Commission Act by reason of anything contained in this Hold Separate.

Now, therefore, the Parties agree, upon the understanding that the

Commission has not yet determined whether the Acquisition will be

challenged, and in consideration of the Commission's agreement that, at

the time it accepts the Consent Agreement for public comment, it will

grant early termination of the Hart-Scott-Rodino waiting period, as

follows:

1. Praxair agrees to execute and be bound by the Consent Agreement.

2. Praxair agrees that from the date this Hold Separate is accepted

until the earliest of the times listed in subparagraphs 2.a.-2.b., it

will comply with the provisions of Paragraph 3. of this Hold Separate:

a. three (3) business days after the Commission withdraws its

acceptance of the Consent Agreement pursuant to the provisions of

Section 2.34 of the Commission's Rules; or

b. the time that divestiture of the Merchant Divestiture Assets and

Businesses as required by Paragraph II of the Consent Agreement is

completed.

3. To assure the complete independence and viability of the

Merchant Divestiture Assets and Businesses, and to assure that no

material confidential information is exchanged between Praxair and the

Merchant Divestiture Assets and Businesses, Praxair shall hold the

Merchant Divestiture Assets and Businesses separate and apart on the

following terms and conditions:

a. Within 30 days from the date this Hold Separate becomes final

Praxair shall cause all of its rights, title and interest in the

Merchant Divestiture Assets and Businesses, as defined in Paragraph

I.G. of the Consent Agreement, as well as all such necessary personnel,

including but not limited to, payroll and marketing personnel, to be

transferred to a separate corporation (``Nucorp''), and effect any

other arrangements as are necessary to ensure that Nucorp has complete

viability and independence from Praxair (meaning here and hereinafter,

Praxair excluding the Merchant Divestiture Assets and Businesses,

personnel connected with the Merchant Divestiture Assets and

Businesses, and Nucorp as of the date this Agreement is signed, but

including all other portions of CBI).

b. Nucorp shall be held separate and apart and shall be managed and

operated independently of Praxair, except to the extent that Praxair

must exercise direction and control over Nucorp to assure compliance

with this Hold Separate or the Consent Agreement.

c. Praxair shall maintain the marketability, viability, and

competitiveness of Nucorp, including the Merchant Divestiture Assets

and Businesses, and shall not cause or permit the destruction, removal,

wasting, deterioration, or impairment of any assets or business it may

have to divest except in the ordinary course of business and except for

ordinary wear and tear, and it shall not sell, transfer, encumber

(other than in the normal course of business), or otherwise impair the

marketability, viability or competitiveness of Nucorp including the

Merchant Divestiture Assets and Businesses.

d. Praxair shall appoint a knowledgeable person among the top

management of CBI's Merchant Atmospheric Gases Business to manage and

maintain Nucorp on a day to day basis during the term of the Hold

Separate. The manager shall have exclusive management and control of

Nucorp, and shall manage Nucorp independently of Praxair's other

businesses.

e. The Manager shall report exclusively to the Nucorp Management

Committee (``Management Committee''). The Management Committee shall

consist of the Manager; two other knowledgeable persons from among the

top management of CBI's Merchant Atmospheric Gases Business; and two

Praxair financial officers or comparable, knowledgeable persons from

Praxair's financial office who have no direct involvement with

Praxair's Merchant Atmospheric Gases Business (``Praxair Management

Committee Members''). The Chairman of the Management Committee shall be

the Manager. Except for the Praxair Management Committee Members

serving on the Management Committee, Praxair shall not permit any

officer, employee, or agent of Praxair also to be an officer, employee

or agent of Nucorp. Each Management Committee member shall enter into a

confidentiality agreement agreeing to be bound by the terms and

conditions set forth in Attachment A, appended to this Hold Separate.

The Management Committee shall meet monthly during the course of the

Hold Separate, and as otherwise necessary. Meetings of the Management

Committee during the term of the Hold Separate shall be audio recorded,

and the recording shall be retained for two (2) years after the

termination of the Hold Separate.

f. All material transactions, out of the ordinary course of

business and not precluded by Paragraph 3 hereof, shall be subject to a

majority vote of the Management Committee.

g. Praxair shall not exercise direction or control over, or

influence directly or indirectly, Nucorp, including the Merchant

Divestiture Assets and Businesses, the Management Committee, or the

Manager of Nucorp, any of their operations, assets, or businesses;

provided, however, that Praxair may exercise only such direction and

control over Nucorp as is necessary to assure compliance with this Hold

Separate, the Consent Order and with all applicable laws and except as

otherwise provided in this Hold Separate.

h. Except as required by law, and except to the extent that

necessary information is exchanged in the course of evaluating and

consummating the Acquisition, defending investigations or litigation,

obtaining legal advice, complying with this Hold Separate or the

Consent Order or negotiating agreements to divest assets, Praxair shall

not receive or have access to, or the use of, any material confidential

information of Nucorp or the activities of the Manager or Management

Committee not in the public domain, nor shall Nucorp, the Manager, or

the Management Committee receive or have access to, or the use of, any

material confidential information about Praxair. Praxair may receive on

a regular basis from Nucorp aggregate financial information necessary

and essential to allow Praxair to file financial reports, tax returns,

and personnel reports. Any such information that is obtained pursuant

to this subparagraph shall be used only for the purposes set forth in

this subparagraph. (``Material confidential information,'' as used

herein, means competitively sensitive or proprietary information,

including, but not limited to, customer lists, price lists, marketing

methods, patents, technologies, processes, or other trade secrets, not

independently known to:

1. Praxair, with regard to Nucorp, including the Merchant

Divestiture Assets and Businesses, from sources other than Nucorp or

its employees or the Management Committee; or

2. The Management Committee or Nucorp or its employees, with regard

to Praxair, from sources other than Praxair.)

[[Page 1578]]

i. Except as is permitted by this Hold Separate, the Praxair

Management Committee Members shall not receive any Nucorp material

confidential information and shall not disclose any such information

obtained through their involvement with Nucorp to Praxair or use it to

obtain any advantage for Praxair. The Praxair Management Committee

Members shall participate in matters that come before the Management

Committee only for the limited purpose of considering any capital

investment of over $250,000, approving any proposed budget and

operating plans, authorizing dividends and repayment of loans

consistent with the provisions hereof, reviewing material transactions

described in subparagraph 3.f, and carrying out Praxair's

responsibilities under the Hold Separate and the Consent Agreement.

Except as permitted by the Hold Separate, the Praxair Management

Committee Members shall not participate in any matter, or attempt to

influence the votes of the other directors on the Management Committee

with respect to matters that would involve a conflict of interest

between Praxair and Nucorp, including the Merchant Divestiture Assets

and Businesses.

j. Praxair shall not change the composition of the Management

Committee unless a majority of the Management Committee consents. The

Chairman of the Management Committee shall have the power to remove

members of the Management Committee for cause and to require Praxair to

appoint replacement members to the Management Committee in the same

manner as provided in Paragraph 3.e. of this Hold Separate. Praxair

shall not change the composition of the management of the Merchant

Divestiture Assets and Businesses, except that the Management Committee

shall have the power to remove management employees for unsatisfactory

performance or for cause.

k. If the Chairman of the Management Committee ceases to act or

fails to act diligently, a substitute Chairman shall be appointed in

the same manner as provided in Paragraphs 3.d. and 3.e.

l. CBI personnel connected with Nucorp or the Merchant Divestiture

Assets and Businesses or providing support services to Nucorp or the

Merchant Divestiture Assets and Businesses as of the date this Hold

Separate is signed shall continue, as employees of Praxair, to provide

such services as of the date of this Hold Separate. Such Praxair

personnel must retain and maintain all material confidential

information relating to Nucorp, including the Merchant Divestiture

Assets and Businesses on a confidential basis and, except as is

permitted by this Hold Separate, such persons shall be prohibited from

providing, discussing, exchanging, circulating, or otherwise furnishing

any such information to or with any other person whose employment

involves any other Praxair business.

Such Praxair personnel shall also execute a confidentiality

agreement prohibiting the disclosure of any material confidential

information concerning Nucorp, including the Merchant Divestiture

Assets and Businesses, or Praxair information.

m. Nucorp shall be staffed with sufficient employees to maintain

the viability and competitiveness of the Merchant Divestiture Assets

and Businesses, which employees shall be Nucorp employees and may also

be hired from sources other than Praxair. Each management employee of

Nucorp shall execute a confidentiality agreement prohibiting the

disclosure of any material confidential information concerning Nucorp.

n. Praxair shall circulate to the management employees of Nucorp

and appropriately display a notice of this Hold Separate and Consent

Order in the form attached hereto as Attachment A.

o. Praxair shall cause Nucorp to expend funds for research and

development, quality control, manufacturing and marketing of the

products produced at Nucorp at a level not lower than that budgeted for

the 1994 fiscal year, and shall increase such spending as deemed

reasonably necessary in light of competitive conditions. Within thirty

(30) days of the date of this Hold Separate, the Chairman of the

Management Committee shall develop a budget and operating plan for the

1996 fiscal year that complies with the provisions of this Paragraph

and present it to the Management Committee for approval. If necessary,

Praxair shall provide Nucorp with any funds to accomplish the

foregoing. Praxair shall provide to Nucorp such support services as

provided by CBI prior to the Acquisition.

p. Praxair shall provide Nucorp with sufficient working capital to

operate at a level not less than the rate of operation in effect during

the twelve (12) months preceding the date of this Hold Separate.

q. The Management Committee shall serve at the cost and expense of

Praxair. Praxair shall indemnify the Management Committee against any

losses or claims of any kind that might arise out of its involvement

under this Hold Separate, except to the extent that such losses or

claims result from misfeasance, gross negligence, willful or wanton

acts, or bad faith by the Management Committee members.

r. The Management Committee shall have access to and be informed

about all companies who inquire about, seek or propose to buy the

Merchant Divestiture Assets and Businesses.

s. Notwithstanding the provisions of Paragraph 3.i., companies who

undertake a due diligence process in the course of negotiations to

purchase Nucorp, or any part thereof, may be accompanied and assisted

by either or both of the Praxair Management Committee Members, in

addition to appropriate Nucorp employees selected by the Management

Committee. The Praxair Management Committee Members may delegate tasks

relating to such due diligence to attorneys, accountants and/or other

financial employees of Praxair who are not directly engaged in the

Praxair Merchant Atmospheric Gases Business; provided, however, that

such Praxair employees, accountants and attorneys shall execute a

confidentiality agreement prohibiting the disclosure of any Nucorp

material confidential information.

4. Should the Federal Trade Commission seek in any proceeding to

compel Praxair to divest itself of Nucorp, or any additional assets, as

provided in the Consent Agreement, or to seek any other injunctive or

equitable relief, Praxair shall not raise any objection based on the

expiration of the applicable Hart-Scott-Rodino Antitrust Improvements

Act waiting period or the fact that the Commission has permitted the

Acquisition. Praxair shall also waive all rights to contest the

validity of this Hold Separate.

5. To the extent that this Hold Separate requires Praxair to take,

or prohibits Praxair from taking, certain actions that otherwise may be

required or prohibited by contract, Praxair shall abide by the terms of

this Hold Separate or the Consent Agreement, and shall not assert as a

defense such contract requirements in any action brought by the

Commission to enforce the terms of this Hold Separate or the Consent

Agreement.

6. For the purpose of determining or securing compliance with this

Hold Separate, subject to any legally recognized privilege or provision

of applicable law, and upon written request with reasonable notice to

Praxair made to its General Counsel, Praxair shall permit any duly

authorized representative or representatives of the Commission:

[[Page 1579]]

a. Access during the office hours of Praxair and in the presence of

counsel to inspect and copy all books, ledgers, accounts,

correspondence, memoranda, and other records and documents in the

possession or under the control of Praxair or relating to compliance

with this Hold Separate;

b. Upon five (5) days' notice to Praxair, and without restraint or

interference from it, to interview officers or employees of Praxair,

who may have counsel present, regarding any such matters.

7. This Hold Separate shall not be binding until approved by the

Commission.

Attachment A--Notice of Divestiture and Requirement for Confidentiality

Praxair, Inc. (``Praxair'') and CBI Industries, Inc. have entered

into a Consent Agreement and Agreement to Hold Separate with the

Federal Trade Commission (``Commission'') relating to the divestiture

of the Merchant Divestiture Assets and Businesses. Until after the

Commission's Order becomes final and the Merchant Divestiture Assets

and Businesses are divested, the Merchant Divestiture Assets and

Businesses must be managed and maintained as a separate company,

independent of all other Praxair businesses. All competitive

information relating to The Merchant Divestiture Assets and Businesses

must be retained and maintained by the persons involved in the Merchant

Divestiture Assets and Businesses on a confidential basis and such

persons shall be prohibited from providing, discussing, exchanging,

circulating, or otherwise furnishing any such information to or with

any other person whose employment or agency involves any other Praxair

business. Similarly, all such persons involved in any other Praxair

business shall be prohibited from providing, discussing, exchanging,

circulating or otherwise furnishing competitive information about such

business to or with any person whose employment or agency involves the

Merchant Divestiture Assets and Businesses.

Any violation of the Consent Agreement or the Agreement to Hold

Separate, incorporated by reference as part of the Consent Order, may

subject Praxair to civil penalties and other relief as provided by law.

Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted subject

to final approval an agreement containing a proposed Consent Order from

Praxair, Inc. (``Praxair''), under which Praxair will be required to

divest all of the assets and businesses relating to four CBI

Industries, Inc. (``CBI'') plants that produce atmospheric gases. In

addition, the Commission has accepted an Agreement to Hold Separate

(``Hold Separate''), under which Praxair will be required to preserve

the assets to be divested as viable, competitive and independent

businesses pending divestiture.

The proposed Consent Order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received, and will decide whether it should

withdraw from the agreement or make final the agreement's proposed

Order.

Pursuant to a cash tender offer dated November 3, 1995, Praxair

proposed to acquire all of the common shares of CBI in a transaction

valued at approximately $2.0 billion. On December 22, 1995, the parties

entered into a definitive agreement whereby Praxair will purchase all

of CBI's common shares. The proposed complaint alleges that the

acquisition, if consummated, would violate Section 7 of the Clayton

Act, as amended, 15 U.S.C Sec. 18, and Section 5 of the Federal Trade

Commission Act, as amended, 15 U.S.C. Sec. 45, in the markets for

merchant oxygen and merchant nitrogen in Northern and Southern

California, Eastern Connecticut, and Western Wisconsin/Southeastern

Minnesota, and in the market for merchant argon in Eastern Connecticut,

and Western Wisconsin/Southeastern Minnesota.

Common air consists of three principal gases which exist in the

atmosphere in fixed proportions: nitrogen (78%); oxygen (21%); and

argon (0.9%). These gases are commonly referred to collectively as

``atmospheric gases.'' Nitrogen is used primarily to create inert

environments in applications such as heat treating and chemical

blanketing, and also for freezing purposes in industries such as food

products. Oxygen is used mainly for combustion and oxidization purposes

in applications such as foundries, and steel and glass production, and

also for medical purposes. Argon is mostly used for welding purposes.

Because of their unique properties, there are no adequate substitutes

for nitrogen, oxygen or argon. ``Merchant'' atmospheric gases are

products (nitrogen, oxygen and argon) supplied to customers in either

in bulk liquid form or gaseous form in cylinders.

Geographically, due to significant transportation costs, merchant

nitrogen and merchant oxygen can be economically shipped a maximum of

approximately 150 to 300 miles from the production facility, depending

on such factors as the degree of traffic congestion in a given area.

Merchant argon can be shipped much longer distances (up to

approximately 1,000 miles), because it is more expensive than nitrogen

and oxygen.

Praxair's acquisition of CBI would reduce the number of merchant

nitrogen and merchant oxygen competitors in both Northern and Southern

California from five to four. In the Northern California market, the

post-acquisition Herfindahl-Hirschman Index (``HHI'') would increase by

431 points to 3366, and Praxair would increase its share of that market

to 32%. In the Southern California market, the post-acquisition HHI

would increase by 440 points to 2727, and Praxair would become the

market leader with 34.8% of the market. In two additional areas,

Eastern Connecticut and Western Wisconsin/Southeastern Minnesota,

Praxair and CBI are each other's closest geographic competitor in

merchant nitrogen, oxygen and argon.

New entry into any of these four areas would also be time-consuming

and unlikely. Construction of a new manufacturing facility capable of

serving the merchant atmospheric gases markets takes approximately two

years, and is unlikely as a large percentage of a new plant's output

must be sold out prior to or shortly after opening in order to account

for the facility's opening costs and the need to operate the plant at a

sufficient level of capacity utilization.

Praxair's acquisition of CBI poses serious antitrust concerns. In

the Northern and Southern California markets for merchant nitrogen and

oxygen, the acquisition would eliminate direct actual competition

between Praxair and CBI, enhance the likelihood of coordinated

interaction, and thereby increase the likelihood that consumers would

be forced to pay higher prices. Coordinated interaction would be

enhanced in Northern and Southern California because merchant nitrogen

and oxygen are homogeneous products and the remaining firms in both

markets would be a fairly homogeneous group that have similar

incentives. In Eastern Connecticut and Western Wisconsin/Southeastern

Minnesota, where Praxair and CBI are each other's closest geographic

competitor in merchant nitrogen, oxygen and argon, the acquisition

would eliminate direct actual competition between the parties

[[Page 1580]]

and increase the likelihood that Praxair would unilaterally raise

prices to consumers.

Under the proposed Consent Order, Praxair is required to divest

four of CBI's atmospheric gases production facilities, either

individually or in some combination. These facilities are located in:

(1) Vacaville, California; (2) Irwindale, California; (3) Bozrah,

Connecticut; and (4) Madison, Wisconsin. The proposed Consent states

that this divestiture shall take place within twelve (12) months of the

date the proposed Order becomes final, and shall be to an acquirer or

acquirers approved by the Commission. If Praxair fails to divest the

assets within 12 months, a trustee may be appointed to divest the four

plants.

The proposed Order also requires Praxair to take all steps

necessary to ensure that the plants to be divested continue as ongoing,

viable and competitive operations. To this end, an Agreement to Hold

Separate is incorporated into the proposed Order to preserve the four

plants to be divested and to remedy any anticompetitive effects of the

acquisition. Under the Hold Separate, Praxair commits to assure the

complete independence and viability of the four plants to be divested.

Furthermore, to assure that no confidential information is exchanged

between Praxair and the businesses that will be divested, Praxair will

hold those businesses separate and apart from all of its other

operations.

The Order also requires Praxair to provide the Commission a report

of compliance with the divestiture provisions of the Order within sixty

(60) days following the date the Order becomes final, and every sixty

(60) days thereafter until Praxair has completed the required

divestiture.

Finally, with the exception of the Eastern Connecticut and Western

Wisconsin/Southeastern Minnesota areas, where Praxair and CBI are each

other's closest geographic competitor, the Complaint accompanying the

Consent Order does not allege a violation with respect to merchant

argon. Because merchant argon can be economically shipped significantly

greater distances than nitrogen and oxygen, the geographic market for

merchant argon most likely consists of the contiguous United States.

CBI's share of the argon market is extremely small, seven other

competitors would remain in the market after the acquisition, and

anticompetitive effects on a national scale appear unlikely. However,

localized unilateral anticompetitive effects are likely in the Eastern

Connecticut and Western Wisconsin/Southeastern Minnesota areas, where

Praxair and CBI are each other's closest competitors. The divestitures

that the proposed Consent Order requires in Eastern Connecticut and

Western Wisconsin/Southeastern Minnesota eliminate the likelihood of

unilateral anticompetitive effects in merchant argon in those areas.

The purpose of this analysis is to facilitate public comment on the

proposed Order, and it is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 96-788 Filed 1-19-96; 8:45 am]

BILLING CODE 6750-01-P