Washington, DC -- The US Department of Justice said 14 Dec that Pittsburgh-based L.B. Foster Co. must divest a West Virginia plant used in development, manufacture and sale of certain railroad joints to Koppers Inc., in order to proceed with its acquisition of Portec Rail Products Inc.
The department said that the acquisition as originally proposed would combine the two primary US manufacturers of bonded insulated rail joints and two of only three US manufacturers of polyurethane-coated insulated rail joints. Divestiture of the West Virginia plant will preserve competition for certain types of railroad joints, the DOJ said.
Without the divestiture, the acquisition would lead to higher prices, lower quality, less customer service and less innovation, added the DOJ.
The DOJ's Antitrust Division filed a civil antitrust lawsuit in US District Court for the District of Columbia to block the proposed acquisition at the same time as it filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.
The DOJ explains the use of rail joints -- steel bars bolted onto the ends of two pieces of rail and used to connect the abutting ends of the rails. Insulated rail joints are ones that are used to break the electric current flowing through the rail, using a material placed on the steel bars and between the two abutting pieces of rail. Bonded joints use epoxy in addition to bolts to bind the steel bars to the rails. The epoxy makes the joints stronger and, as a result, able to withstand the heaviest loads for extended periods of time.
Because of their strength, bonded joints are necessary for the main track lines on the largest US railroads, called Class 1 railroads, which handle most of the heavy freight rail traffic in the US.
Polyurethane-coated insulated rail joints provide electrical insulation through a polyurethane-covered bar that is bolted to the rail. Poly joints are generally used in areas where the weight and traffic is less than on the Class 1 railroads' main track lines.
The DOJ alleges that the proposed acquisition would eliminate the significant competition between L.B. Foster and Portec in the already highly concentrated US markets for bonded insulated rail joints and polyurethane-coated insulated rail joints.
The proposed settlement requires the companies to divest Portec's Huntington, West Virginia, plant, which manufactures all of Portec's bonded insulated rail joints and polyurethane-coated insulated rail joints.
The department says that Koppers will integrate the divestiture assets into its current operations to create a viable business involved in the development, manufacture and sale of bonded insulated rail joints and polyurethane-coated insulated rail joints and that the divestiture to Koppers will remedy the competitive concerns alleged in the lawsuit.