In this week’s roundup, we look at the Supreme Court, which rejected a case that would determine whether private equity firms are liable for the pension obligations of their portfolio companies. We also summarize remarks from the Department of Justice’s Antitrust Division, which cites private equity firms as a preferred buyer of divested assets; a legislative package in the House that would deny aid to restaurants with PE backing; and an update on negotiations for a second stimulus relief bill.
Supreme Court Rejects Private Equity Case Involving Pension Liabilities
- The Supreme Court decided Monday it will not hear arguments in a case that would determine whether private equity firms are liable for the pension obligations of their portfolio companies.
- The nation’s highest court denied the motion to take up the case filed by the pension fund of the New England Teamsters labor union against private equity firm Sun Capital Partners. The court did not give a reason for its dismissal.
- The pension fund’s representatives alleged Sun Capital could be liable for lost contributions following the bankruptcy of one of the firm’s portfolio companies.
- In declining to hear the case, the dispute will revert to a 2019 decision made by the First Circuit Court of Appeals that ruled in favor of Sun Capital.
- The New England Teamsters Pension Fund asked the Supreme Court to hear the case in August, after the First Circuit Court found Sun Capital was not responsible for more than $4.5 million in pension liabilities following the bankruptcy of a brass manufacturing company owned by two of the firm’s funds, according to court documents. [Middle Market Growth, Benjamin Glick]
Private Equity Listed as a ‘Preferred’ Divested Assets Buyer by DOJ
- The Department of Justice will use the same criteria to evaluate private equity firms as it does with other strategic buyers when they buy divested assets—but also says PE may be a preferred purchaser.
- In remarks delivered to Georgetown Law on Tuesday, Assistant Attorney General for the Antitrust Division of the Department of Justice Markan Delrahim said the guide that helps law enforcement officials avoid anticompetitive business practices in M&A transactions, known as the Merger Remedies Manual, will begin treating private equity firms and private equity-backed companies the same as other strategic buyers when purchasing divested assets.
- Because of a shift in private equity, the DOJ’s 2020 Merger Remedies Manual—published in September—said a private equity purchaser may be preferred over others.
- The DOJ’s Merger Remedies Manual has not undergone significant revision since 2004. [Middle Market Growth, Benjamin Glick]
Restaurants with PE Backing Excluded in Proposed Legislative Package
- Lawmakers unveiled a sweeping legislative package proposal last week, which contained a provision that would prohibit support to restaurants with private equity backing.
- Democrats in the House Financial Services Committee introduced an updated version of the HEROES Act last Thursday.
- The proposal includes multiple provisions provided by committee members that would support renters and homeowners, financial institutions and local governments.
- One section, based on a bill from Rep. Earl Blumenauer, D-Ore., would establish a program administered by the Treasury to provide restaurants, bars, food trucks and other businesses with a grant to cover the difference between a business’s 2019 and 2020 revenues.
- However, it would prohibit grants to restaurants with private equity backing.
- The updated HEROES Act resembles the committee’s proposal from May, which passed in the House but failed in the Senate. [Middle Market Growth, Benjamin Glick]
Trump Softens on Stimulus Talks
- One day after he halted negotiations with Democrats, Trump called for renewed talks on Wednesday over individual coronavirus relief
- Trump froze talks on Tuesday between lawmakers and the White House, but the administration is now seeking to pass a series of bills that would send checks to individuals and families across the U.S. [The Wall Street Journal, Andrew Duehren and Kristina Peterson]
- But such a plan has been rejected before by lawmakers on both sides of the political spectrum. A “skinny stimulus” drafted in the Senate was blocked in September.
- If that holds, there will be no comprehensive plan to provide jobless aid or stimulus checks to Americans, aid to small businesses and airlines, or send federal support to state and local governments. [The New York Times, Jim Tankersley and Emily Cochrane]
Benjamin Glick is Middle Market Growth’s associate editor.