Tribunal approves Ferro / Arkema merger with pricing and divestiture conditions

OUTCOME OF COMPETITION TRIBUNAL HEARING
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Tribunal approves Ferro / Arkema merger with pricing and divestiture conditions

Today the Competition Tribunal (“Tribunal”) approved the merger between Ferro Industrial Products (Pty) Ltd and Arkema Resins (Pty) Ltd on condition that a maximum price will apply for a two-year period for resin sales to existing and new mining resin customers that produce mine resin capsules. The new merged firm must also sell off, amongst others, all product formulations and specifications belonging to Arkema for its unsaturated polyester resin or UPR products in order to address the competition concerns brought about by the transaction. These remedies were proposed by the merging firms after an 11-day hearing into the potential competition effects of the merger on the market.

Representatives of the two current mining resin users in South Africa, Rocbolt (Pty) Ltd and Minova (Pty) Ltd, testified at the hearing, as well as a number of other UPR customers, including producers of fibreglass pool shells, free standing baths and exterior and interior parts for trucks and busses. Other witnesses called included the two other current producers of UPRs in South Africa, KZN Resins (Pty) Ltd and Scott Bader Company Limited.

The hearing came after the Competition Commission assessed the proposed merger and concluded that the deal was likely to cause a substantial lessening of competition as it would result in the removal of an effective competitor from the UPR market, namely Arkema Resins. The Commission found, amongst other things, that the merging firms were the only historic suppliers of UPR in the mining segment and therefore the merger would give Ferro Industrial Products a monopoly position in this area. For this reason, the Commission recommended that the Tribunal prohibit the merger outright. However the merging parties have since agreed to the above-mentioned remedies in order to maintain the competitive landscape.
The UPR business to be sold includes all customer lists and sales histories relating to Arkema’s UPR products; all product formulations, specifications belonging to Arkema, technical data sheets, technical details of raw materials, as well as process laboratory know-how related to the UPR products currently manufactured by Arkema; all information relating to the contact details of existing suppliers of raw materials to Arkema and copies of existing supply agreements; as well as the specific entitlement to use the term “UPR formerly made by Arkema” for a number of years.

The Tribunal has further imposed a condition related to employment. The new merged firm may not retrench any non-management employees as a consequence of the implementation of the proposed merger for a period of 3 (three) years. Insofar as management employees are concerned, no retrenchments can be effected as a consequence of the implementation of the merger for a period of 2 (two) years from the approval date of the transaction.

The merging parties are both active in the market for the manufacture and supply of UPR or composite resin. A resin is a solid or liquid synthetic organic polymer used as the basis for plastics, adhesives, varnishes, or other products. Arkema Resins is also active in the manufacture and supply of coating resin.

The Tribunal will give its reasons for its decision in due course.

Issued By:
Nandi Mokoena
Communications: Competition Tribunal
Cell: +27 (0) 82 399 1328
E-mail: NandisileM@live.co.za or NandiM@comptrib.co.za

On Behalf Of:
Lerato Motaung
Registrar: Competition Tribunal
Tel: (012) 394 3355
Cell: +27 (0) 82 556 3221
E-Mail: LeratoM@comptrib.co.za