Regulatory approvals determine when the deal will close
For almost all mergers, the rate of return is driven by the time it takes to finalize the transaction. In the case of the MarkWest-MPLX merger, the main regulatory hurdle is antitrust.
Before the merger of MarkWest Energy Partners (MWE) and MPLX (MPLX) can move forward, each company will have to file under the Hart–Scott–Rodino Antitrust Improvements Act. Typically, to get a handle on antitrust, the first-step merger arbitrageurs will look at each company’s 10-K to see if the two parties are named as competitors. In a 10-K, a company provides an in-depth description of its business.
MarkWest and MPLX don’t name each other as competitors in their annual reports. In fact, they don’t name any specific competitors. The combined company will be the fourth largest pipeline MLP in the United States, which doesn’t appear problematic on its face.
These companies face competition from many different players, including big integrated oil companies. That said, antitrust analysis is fundamentally a local analysis, and regulators will be looking at individual markets as well as the overall market.
Best efforts language
The companies agree to use their reasonable best efforts to get the deal past the regulators and to contest any lawsuits by the regulators. They’re not required to commit to any antitrust remedies such as divestitures or behavioral remedies that would have a material adverse effect on the business or assets of the combined company.
MarkWest will have to get the proxy statement approved by the SEC (Securities and Exchange Commission). If the SEC makes any comments, the companies will need to fix the language and file again. Once the SEC approves the proxy statement, a vote must be scheduled at least 30 days from the mailing date. If the deal doesn’t get a second request, the approval of the proxy statement will be the gating item.