Two major chemical industry deals are stalled in Europe as government officials scrutinize them for the impact they may have on competitiveness.
The European Commission is investigating whether the proposed merger of Solvay’s and Ineos’s polyvinyl chloride businesses to create a new company with annual sales of $5.6 billion would affect competitiveness in the markets for PVC and bleach. And the EC just launched an investigation into whether Huntsman Corp.’s acquisition of Rockwood’s performance additives and titanium dioxide businesses for $1.1 billion would negatively affect buyers of TiO2.
In a bid to address the EC’s concerns, Solvay and Ineos have proposed that they divest PVC plants in Germany, the Netherlands, and France, along with ethylene dichloride, vinyl chloride, and chlor-alkali plants in Belgium. The assets marked for sale “have the ability to compete as successful stand-alone businesses under third-party ownership,” the firms state. The EC will decide by March 21 whether to allow the merger to go ahead.
Meanwhile, Huntsman says the EC is due to finish its investigation and provide a final ruling on its transaction with Rockwood by late July. An antitrust review by U.S. regulators already cleared the deal on Dec. 18, 2013. “We are working to satisfy the European Commission as soon as possible,” says Huntsman CEO Peter R. Huntsman.
Despite the high level of attention to chemical deals, EC competition spokesman Antoine Colombani asserts that no change of policy has occurred. “We apply the same rules and standards to each transaction,” he says.
But greater scrutiny of chemical company mergers and acquisitions in Europe may be in the cards because of the market’s structure. “The deals that need to be evaluated by the EC increasingly pertain to markets which are quite concentrated,” says Joachim von Hoyningen-Huene, a partner with consulting firm A.T. Kearney in Munich. “M&A in those markets increases the risk of anticompetitive behavior, so it’s quite natural that more deals are scrutinized.”
Nonetheless, M&A activity in Europe will continue, Hoyningen-Huene says, and many potential transactions are still in the pipeline because of tough economic conditions.