The European Commission has approved BASF’s $1.8 billion purchase of Solvay’s nylon 6,6 business, but the regulatory body is requiring the divestiture of enough assets from the Solvay unit to create a new European competitor.
The transaction was announced in September 2017. A subsequent EC investigation concluded that the deal would lead to a reduction of the number of suitable suppliers and likely price increases. The EC also worried that the merger could restrict competitors’ access to nylon 6,6 raw materials such as adiponitrile and adipic acid.
The nylon 6,6 industry features a few large, integrated players that operate just a handful of plants for critical raw materials. This concentration makes the industry vulnerable to supply disruptions.
The EC accepted remedies proposed by BASF and Solvay. BASF will divest Solvay facilities in France, Poland, and Spain to a single, not-yet-named buyer. The plants make hexamethylene diamine, nylon base polymer, and nylon 6,6 compounds. Moreover, BASF must form a joint venture with the buyer at Solvay’s adipic acid plant in Chalampé, France.
BASF will be allowed to keep Solvay’s stake in a French adiponitrile joint venture with Invista, one of BASF’s key objectives for the transaction. The firm must, however, supply adiponitrile to the buyer of the Solvay assets.
Brendan Dooley, director of engineering plastics in North America at the consulting firm IHS Markit, says the EC took appropriate action. “I think there were areas of concern,” he says. “It is a concentrated industry globally.”
The deal will ultimately be a plus for the nylon 6,6 industry, Dooley says. “BASF will promote and grow the nylon 6,6 business more quickly and more aggressively than Solvay intended to do.”