The FTC’s review of the proposed merger between Express Scripts and Medco was closely watched in many circles, including by investors, Congress, competitors and customers. After almost a year of review, the Federal Trade Commission announced early on the morning of April 2, 2012 that it had closed its investigation of the proposed merger between two large pharmacy benefit managers – Express Scripts, Inc. (“ESI”) and Medco Health Solutions, Inc.– without taking any action. ESI closed the transaction and began integrating with Medco before 8:30 am on April 2. The closing and integration of two merged firms is sometimes colloquially referred to in the antitrust world as “scrambling the eggs.”
Two of the groups tracking the FTC’s investigation – the National Association of Chain Drug Stores and the National Community Pharmacists Association – along with several independent and chain pharmacies filed suit to prevent the transaction from closing on March 29. But by April 10, when the judge heard arguments on the motion for a temporary restraining order, ESI and Medco had already engaged in significant integration, including terminating senior and junior management at Medco and ESI’s review of Medco’s confidential and trade secret information. On April 25, the judge denied the TRO/hold separate based almost entirely on the fact that ESI had done such a good job scrambling the eggs that the majority of the plaintiffs’ claimed harms had already occurred.
The lesson for companies considering private merger litigation is to make sure that all papers are filed long before the potential closing date (and to peruse public statements by the merging entities with respect to the timing of closing very, very closely). The lesson for merging entities is that if all closing conditions are met, closing the transaction and taking quick and decisive steps to integrate can prevent third parties from successfully obtaining preliminary injunctive relief. In particular, companies engaging in transactions that are not HSR reportable have a legal incentive to integrate as quickly as possible.