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Mergers & Acquisitions

Antitrust regulators seek to block Evonik peroxide purchase

The Federal Trade Commission says the purchase of PeroxyChem will leave the market too concentrated

by Alexander H. Tullo
August 5, 2019

20190805lnp2-evonik.jpg
Credit: Evonik
Evonik's hydrogen peroxide plant in Gibbons, Alberta

The US Federal Trade Commission is attempting to block Evonik Industries’ purchase of the hydrogen peroxide producer PeroxyChem, saying the deal would create too much concentration in the US market.

Evonik announced the $625 million acquisition in November 2018, touting it as a deal that would strengthen its business in hydrogen peroxide, used primarily to bleach paper pulp and de-ink recycled paper. The purchase would also expand Evonik’s business in specialties such as the disinfectant peracetic acid.

PeroxyChem, which has annual sales of about $300 million, had been FMC’s peroxides business until 2014, when the private equity firm One Equity Partners acquired it. Evonik purchased PeroxyChem’s plant in the Netherlands in 2015.

The FTC has issued an administrative complaint. It also is seeking a restraining order in US District Court for the District of Columbia to halt the deal, which was about to be completed.

The FTC is worried about overconcentration in the peroxide market. The deal would combine two of the five hydrogen peroxide makers in North America.

The concentration would be worst in the Pacific Northwest, where Evonik would command more than half of the market after the merger, the FTC says. Solvay would be its only significant competitor. In the Southern and Central US, Evonik would account for nearly half of peroxide sales, its competitors being Solvay, Arkema, and Nouryon.

The FTC is also concerned that an overconcentrated market is susceptible to collusion. Evonik predecessor Degussa, Solvay, and Nouryon forebearer AkzoNobel were implicated in a price-fixing case more than a decade ago.

“The acquisition will increase the likelihood of coordination in a market already vulnerable to coordination, functioning as an oligopoly, and with a long history of price fixing,” the FTC said in its complaint.

An administrative trial will be begin next January.

Evonik promises to fight. It says the transaction will would allow it to optimize its operations and distribution network. “We remain optimistic that we will prevail at trial and complete the acquisition,” Evonik CEO Christian Kullmann says.

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