Thread by @matthewstoller

1. I cover monopolies in my newsletter, and all their bizarre and harmful effects. Today I showed how a merger in the salt industry - yes salt - could spike car accidents in the Midwest. And it gets weirder. mattstoller.substack.com/p/how-a-salt-m…

2. Yes we need semiconductors and search engines and app stores, but the reality is all the basic old-timey stuff - steel, railroads, brass, and yes salt - is still as essential as it ever was. America needs salt. Not just for food, but to stop car accidents.

3. If we don’t have salt, Midwesterners can't drive, because salt is what keeps our roads manageable. Without salt, trucks can’t deliver supplies and the economy comes to a standstill. Every year, over 1300 people die in car accidents due to snowy, slushy, or icy pavement

3. And that’s why I paid attention when ex-convict and junk bond king Michael Milken’s alleged private equity firm, Stone Canyon, bought two major salt producers over the last year. It bought Kissner, which itself is a merger of a bunch of salt producers. prnewswire.com/news-releases/…

4. Nine months later, Stone Canyon bought Morton’s Salt, the largest producer in the world, for $3.2 billion, and it is now awaiting antitrust approval. Morton's is the biggest salt producer in the world, is one of the most recognized brands in America. prnewswire.com/news-releases/…

5. This series of mergers should terrify cities in the upper Midwest, who have to buy salt in unpredictable spot markets and often deal with shortages when the weather gets bad. Minnesota, for instance, bought roughly 1.5 million tons of salt in 2020. mattstoller.substack.com/p/how-a-salt-m…

6. Salt is bulky to move over land, so the upper Midwest has to buy local. Salt is mined; Kissner’s mine and Morton’s mine are w/in a few thousand meters. “You can literally connect the two salt mines underground,” someone in the industry told me. The spot markets are local too.

7. If salt mining consolidates, then a whole bunch of markets will move from four producers to three, or three to two. And in some bidding markets, after one producer has sold their salt for the year, the other gets to set the price. Goodbye city budgets! Wheee!

8. And then there are shortages. And that's the real problem. Because private equity tends to cut costs and screw things up operationally, especially in high capital industries like mining. Mining takes cash, and private equity likes to keep the cash for themselves.

9. Since salt demand is weather-based, there will always be demand spikes. The monopolized market structure makes it worse, because monopolies just don't have to produce to keep market share. And more extreme weather will create more spikes and troughs. mattstoller.substack.com/p/how-a-salt-m…

10. Producers handle spikes by promising low prices and then... just not delivering salt. Landscapers that service residential and commercial customers are almost always shafted first, meaning driveways and sidewalks go unsalted. Cities then lose out. mattstoller.substack.com/p/how-a-salt-m…

11. The buyer almost certainly overpaid for both Kissner and Morton’s, and it is going to have to cut costs and reduce capital spending, which will harm production, because salt mining needs a lot of investment. Then it will likely have to raise prices.

Now the good news...

12. The salt roll-up can still be blocked by the DOJ Antitrust division or any Midwestern state attorney general. It's shocking that this merger was even contemplated, but enforcement is so pathetic these days that even Exxon and Chevron discussed merging! wsj.com/articles/exxon…

13. And the policy environment on antitrust is changing rapidly. In the last two weeks there were multiple hearings in the House and Senate, plus Arizona and Missouri passing anti-monopoly bills. Plus this. arstechnica.com/tech-policy/20…

14. As money floods into the economy from the Biden stimulus, we are on the cusp of a historic mergers and acquisitions wave. Stories like this salt roll-up will become more common. Instances of financiers overpaying for mid-market companies are accelerating. (SPAC cough cough!)

15. The old-timey commodities Biden will need for infrastructure is or will be a target for M&A, exactly like this salt merger. More $$$ means higher prices if you have market power on gov't procurement. (even things like nuclear missiles are monopolized!)

16. In other words, financiers in Beverly Hills playing around spreadsheets, and then destroying salt mining in the Midwest in the process, is going to have to stop. And hopefully new shift in antitrust - with even judges getting populist - will stop it. mattstoller.substack.com/p/judges-break…