UNITED STATES OF AMERICA

BEFORE THE FEDERA TRAE COMMISSION

CHICAGO BRIDGE & IRON COMPAN

a corporation,

CHICAGO BRIDGE & IRON COMPAN N.V. ) a foreign corporation, Docket No. 9300

In the Matter of

PUBLIC

PITT-DES MOINES, INC.,

a corporation.

RESPONDENTS' FURTHER BRIEFING

ON SPECIFIC REMEDY ISSUES

In its Order Directing Further Briefing on Specific Remedy Issues (the "Briefing Order

the Commission requested that Respondents Chicago Bridge & Iron Company N.V. and Chicago

Bridge & Iron Company (collectively, CB&I ) file a brief to (1) specifically identify those

ass"es in the "Relevant Business" definition that are "unecessary to build the relevant products

and the water tan products" and explain why the inclusion of such assets is unecessar and (2)

address which assets outside of the. United States the 'Relevant Business' definition

encompasses and why the inclusion of such assets is unnecessar for an effective divestitue.

CB&I submits this brief without waiving and expressly reserving all arguents and

objections to the Opinion and Final Order that CB&I may assert on appeal, including but not

limited to its appeal on the substantive findings regarding the existence of an antitrst violation

and the propriety of the relief (including the ancillary relief) ordered.
The Defined Term "Relevant Business" Encompasses Businesses and Assets

Unnecessary to Build the Relevant Products and Water Tanks.

The Final Order requires that CB&I reorganize its "Relevant Business" to create "two

independent, stand-alone operating divisions. . . each fully, equally, and independently engaged

in all aspects of the Relevant Business." Final Order at III.A. The "Relevant Business" subject

to division is defined in the Final Order as "all employees, managers, and supervisors and all

assets of every description. . .

engaged, directly or indirectly, in all aspects of engineering, designng, estimating,

bidding, procuring, fabricating, erecting, rehabilitating, or selling any: water

storage tan or system; industral process system, including but not limited to any

digester, absorber, reactor, and tower; flat bottom tan; pressure vessel or sphere;

low temperatue or cryogenic tan or system; vacuum chamber or system; steel

plate fabrication; and specialty strctue, including the Relevant Products.

Final Order at I.P. 

The stated purose of the division is "to create two stand-alone business entities, each

having approximately equal shares of the markets for the Relevant Products, each fully capable

of being divested, and each fully (and, to the extent practicable, equally) engaged in all aspects

of the Relevant Business." Final Order at III.A. In its Opinion, the Commission fuher noted

that it included in the assets to be divested "not only those assets necessar to build the four

relevant products but also those necessar to build water tan products, similar to those tanks

historically built by PDM' s Water Division." Op. at 95. The Commission included the water

products because "this combination of assets has made a saleable package in the past." Id.

Although the Commission s analysis and findings were expressly limited to the U.S.

market for the four specific Relevant Products, and the Opinion discusses only' divestitue of

1 It is unclear whether the descriptive provision following the listing of asset categories modifies

solely those asset categories or also "employees, managers, and supervisors.
assets "necessar to build the four relevant products (andJ .,. to build water tan products " the

definition of the "Relevant Business" potentially goes much further. Not only does the definition

appear to exceed the description of the business acquired from PDM, which was ostensibly the

guidepost for the scope of the necessary divestiture set forth in the Commission s Opinion

accompanying the Final Order, but it might arguably include assets acquired and held by CB&I

both pre- and post-acquisition, which are neither necessary for or relevant to the constrction or

sale ofthe Relevant Products and water tans. For example, the definition of Relevant Business

read literally could conceivably cover every aspect of CB&I's business , extending even to

CB&I's corporate headquarers in Hoofddorp, The Netherlands, or a sales offce in Shanghai

China ("(aJll real propert. . . wherever located" Order at I.P.), even though those offices have

no role in the U.S. tan and water operations and would be of no practical use to New PDM.

The Assets Necessary for the Creation of a Viable Competitor in the Relevant

Products Are No Different Than the Assets Previously Used by PDM to

Compete in Those Products.

CB&I believes that the assets necessary to create two effective competitors in the

Relevant Products is best evaluated in light of the assets CB&I acquired from PDM. The

offering memorandum dated July 2000 (the "Offering Memorandum ), prepared in connection

with the sale ofPDM' s Engineered and Construction Division (the "EC Division ), reflects that

2 Because the Commission s Briefing Order states that the Final Order does not require that

CB&I divide its "' Relevant Business' equally," (Briefing Order at 23) CB&I has limited this

brief to the nature and scope (rather than the volume) of the assets that should be included within

the pool of assets subject to division. CB&I seeks the clarification of the scope of the divestiture

order solely to remove any potential ambiguity regarding its application.

3 Although the acquirer, with the concurrence of the Monitor Trustee, may exclude ftom the

divestiture package assets within the Relevant Business "not necessary to achieve the purposes

of' the Final Order (Final Order at IV. A.), CB&I believes that it is critical to clarfy the scope of

. the remedy for appellate and other purposes.
prior to the challenged acquisition, PDM' s EC Division owned three U.S. tool and constrction

equipment facilities in Tennessee, California, and Texas, and one fabrication plant in Provo

Utah. See CX 522 at 20. The Offering Memorandum also describes the signficant equipment

held at each ofthose facilities. Id. at 21-23. As reflected in the Opinion, the Commission found

that PDM was a viable competitor in th Relevant Products prior to the acquisition. See Op. at

20-21. Accordingly, those assets described in the Offering Memorandum e. three U.S. tool and

construction equipment facilities and one fabrication plant, with the related equipment identified

in the schedules to the Offering Memorandum, reflect the precise assets necessar to compete

against CB&I in the tan business. In fact, the assets necessary to be an effective competitor in

the tan business may actually be just a subset of those assets acquired from PDM as CB&I is

continually learng ftom the influx of numerous new competitors in the market. Accordingly, at

a minimum, any type of asset beyond that described in the Offering Memorandum is, by

definition, unecessary to build the Relevant Products.

In contrast to PDM' s EC Division, which primarly was a U.S. tan builder, CB&I's

business has always exceeded the scope ofPDM' s EC Division, and contrary to the implication

in the Briefing Order, CB&I's other businesses were not and are not an integrated part of its U.S.

tank business. CB&l's projects include not only constrction of the Relevant Products and water

tans, but also hydrocarbon processing plants, offshore structues, pipelines, hydrocarbon storage

tans, and other steel structues and their associated systems. CB&I also provides process and

technology services and maintenance and repair services, such as turnarounds for petroleum

refining and petrochemical plants. Because of the breadth of CB&I' s operations and businesses

4 The actual closing documents reflect that PDM' s EC Division owned only a tool house in

Tennessee and a fabrication facility in Utah.
the assets employed by it in its multitude of businesses canot be the appropriate measure of

what type of assets are necessary to include within a divestiture package.

For example, CB&I has 10 U.S. fabrication facilities, six of which are not used in the

building of the Relevant Products and water tanks. CB&I has 10 U.S. engineering locations, six

of which have nothing whatsoever to do with building the Relevant Products or water tans.

CB&I has 13 U.S. operations locations, six of which with no relationship to building the

Relevant--Products o the water business This leaves 13 faciliies (including the prior PDM

assets) that have any relation, whether significant or not, to the Relevant Products and the water

business. This is the maximum of what may have to be divided and then divested to accomplish

the puroses of the Final Order. Any assets on top of these, which by definition have nothing

whatsoever to do with the tan business in the United States, are "unecessar to build the

relevant products and the water tan products. See Briefing Order at 24.

Accordingly, CB&I requests confirmation that the scope of the assets subject to

divestitue is not intended to exceed the scope of the assets utilized in the domestic tan and

water businesses.

The Definition of Relevant Business Is Not Supported by the PDM Offering

Memorandum.

According to Complaint Counsel, the products included in the definition of Relevant

Business "are derived from the offering memorandum describing the PDM EC Division for the

puroses of its proposed sale in July 2000" and "clearly define(J the to-be-divested 'Tan

Business. ,,, 5 The Commission also states that it has defined the Relevant Business "to match

5 Complaint Counsel's Opposition to Respondents' Petition to Reconsider (" Op?osition ) at 22-

23.
those identified in PDM's offering memorandum." 6 However, a reVIew of the Offering

Memorandum demonstrates that the definition of "Relevant Business" goes far beyond what is

described in the Offering Memorandum and the assets CB&I bought. See CX 522.

The Offering Memorandum describes PDM' s business as the design and constrction of

certain types of storage facilities and their related systems (id. at 9- 11) (identifying the four

Relevant Products, plus flat bottom tans, pressure spheres, and specialty plate structues, such

as-windtu.els- and fusion facilities). The Offering-Memorandum- c1earlydescribes a tan

building business. It does not even get close to the potentially all-encompassing description used

in the Final Order. For example, the Offering Memorandum does not include any reference to

industral process systems " a potentially broad catch-all included in the definition of Relevant

Business (assets used in "engineering, designing, estimating, bidding, procurng, fabricating,

erecting, rehabilitating, or sellng any . . industrial process system. 

. .

). Final Order at I.P.

(emphasis added). Indeed, the Offering Memorandum references "systems" only in conjunction

with the specific storage tans and special plate structues of the tye actually constrcted by

PDM. See, e. CX 522 at 1 ("storage tans and their related systems ), 5 ("storage tan

facilities and their related systems ), 8 ("storage tans and related systems ), 9 ("storage tans

and related systems ), 18 ("The (ECJ Division designs and constructs storage tans and related

systems. . .

If the term "industral process systems " which is not used in the Offering Memorandum

is not limited to the tan business of the type conducted by PDM, it could potentially cover a

6 Briefing Order at 24. The PDM Offering Memorandum purports to describe the capabilities

and operations of PDM' s EC Division, but, as essentially a sales brochure, overstates PDM'

business. In fact, two post-closing adjustments were made, reducing the purchase price in excess

of $15 million. The Offering Memorandum is addressed in the record as CX 522 and CX 385

(these appear to be separate printings ofthe same document with no substantive differences).
whole range of products or services at CB&I having nothing whatsoever to do with tans or

water, never before performed by PDM, never addressed at tral or on appeal before the

Commission, and which are unecessary for an effective and complete divestitue.

In addition, as drafted, the Final Order could require that CB&I include within the pool of

assets to be divested those assets "engaged, directly or indirectly, in all aspects of engineering,

designing, estimating, bidding, procuring, fabricating, erecting, rehabilitating, or selling" steel

plate fabrication and specialty strctures, even if they are not related to the tan business. While

PDM did engage in (or said it engaged in) specialty plate strctues to some extent, Complaint

Counsel got it right when noting that the intent here is to divest a "Tan Business " not unelated

businesses. See Opposition at 22. Accordingly, the definition of Relevant Business should be

modified to reflect the Commission s intent to create a competitor in the Relevant Products;

CB&l's Foreign Assets Are Unnecessary for an Effective Divestiture.

Both the ALJ and the Commission found that the United States was the relevant

geographic market for evaluating the effects of the acquisition. Initial Decision at 5; Op. at 8.

Neither the Commission nor the ALJ made factual findings that Respondents' assets and

operations outside of the United States were (1) engaged in constrcting the Relevant Products

and water business in the United States, (2) acquired from PDM, or (3) required to create a

viable competitor in the Relevant Products within the United States. Notwithstanding the fact

that the Commssion specifically focused on the Relevant Products in the United States and

specifically rejected, as irrelevant, evidence of competition in those businesses outside of the

United States 7 the definition of Relevant Business does not contain any geographic limitation.

See, e. Op. at 62 (rejecting evidence of projects in Trinidad and the Bahamas as "shed(dingJ

no signficant light on the competitive landscape in the United States ); Op. at 8 (defining

relevant geographic market for all product lines as "the United States ); Op. at 52-
More importantly, there is no evidence that PDM used or required any non-U.S. assets to

compete in the U.S. markets.

With one exception, 8 no foreign assets or operations were even acquired in the

acquisition of PDM, and PDM was not actively engaged in the constrction of the Relevant

Products outside of the United States. Nor are any non-U.S. CB&I assets utilized in U.S. tan

projects. The Final Order, however, as written, could be interpreted as requiring CB&I to divest

itself of assets and operations in South Afrca, Australia or any number of other foreign countres

in which CB&I conducts operations (remembering that it is a foreign company) even though they

are wholly unelated to the U.S tan business and, as demonstrated by PDM' s success prior to

the acquisition, are unecessar to sustain the competitive viability of a New PDM.

Alternative Suggestions For Divestiture Package Consistent With the

Commission s Findings.

(discounting overseas LNG construction experience of new market entrants and concluding that

U.S. customers will discount the applicability of overseas experience to U.S. construction

projects).

8 PDM operated a stand alone profit center within the EC Division in Venezuela. 

See CX 29 at

5. The assets held in Venezuela were not used to support PDM' s tank building operations in the

United States.
9 (

10 (

11 (

I CB&I submits that its proposed divestitue package is consistent with the

purpose of the Final Order, appropriate to the industr and market conditions at the time, and

designed to best "achieve the puroses of the Order.

,,12

Dated: June 6, 2005

Respectfully submitted

h:!f ::J 

SKADDEN, ARs, SLATE, MEAGHER & LOM LLP

Four Times Square

New York, NY 10036-6522

Telephone No. : 212-735-2644

Facsimile No. : 917-777-2644

Charles W. Schwarz

SKADDEN, ARs, SLATE, MEAGHER & FLOM LLP

1600 Smith, Suite 4400

Houston, TX 77002-7348

Telephone No. : 713-655-5160

Facsimile No. : 888-329-2286

ATTORNYS FOR RESPONDENTS

CHICAGO BRIGE & IRON COMPAN N.

AN CHICAGO BRIGE & IRON COMPAN

12 CB&I submits this proposal subject to the caveat that it may need to be modified based upon

market and other conditions existing at the time any divestiture may be required.
CERTIFICATE OF SERVICE

, Sara L. Bensley, hereby certify that on June 6, 2005, true and correct copies of

the foregoing were served on the following persons by hand delivery:

One original and twelve copies to:

Donald S. Clark

Secretary

Federal Trade Commission

600 Pennsylvana Avenue, N.

Room H- 159

Washington, D.C. 20580

One copy to each of:

Rhett R. Krlla, Esq.

Assistant Director

Bureau of Competition

Federal Trade Commission

601 New Jersey Avenue, N.

Room NJ-6120

Washington, D.C. 20580

Steven L. Wilensky, Esq.

Federal Trade Commssion

601 New Jersey Avenue, N.

Washington, D.C. 20580

I fuher certify that on June 6, 2005, a true and correct copy of the foregoing was

served on the following by facsimile and regular mail:

Robert M. Unger

Brown Raysman Millstein Felder & Steiner

900 Third Avenue

New York, NY 10022

Xt! L. Bensley 

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