Tribunal overrides Commission’s lean toward merger veto


Tribunal decides against Commission’s recommendation of prohibition of resin merger

The Competition Commission (“Commission”) recommended to the Competition Tribunal (“Tribunal”) to prohibit the proposed acquisition of resin manufacturer Arkema Resins SA (Pty) Ltd (“Arkema”) by specialised coatings company Ferro Industrial Products (Pty) Ltd (“Ferro”).

The acquiring firm, Ferro, operates in the industrial chemicals sector and its activities comprise powder coatings, plastics, enamels and ceramics, glass colours, spectrum ceramics and resin.

Arkema, the target firm, is a wholly-owned subsidiary of Arkema Afrique SAS, which in turn is wholly-owned by Paris-listed company Arkema. Arkema is also involved in the manufacture of unsaturated polyester resin which is used in the manufacture of swimming pools, truck bodies, baths, etc.

The merging parties argued that the Commission’s recommendation to the Tribunal was fundamentally flawed as it failed to take into account certain key considerations, such as the constraint of imports on domestic suppliers, the fact that post-transaction, there were two alternative domestic suppliers to the merging parties and that the merging parties argued that Arkema was not in fact a competitive constraint to Ferro in certain key market segments.

Following a two-week long hearing, the Tribunal approved the merger subject to conditions which involve a pricing formula to customers in the mining segment, a toll-manufacturing agreement and a two-year moratorium on retrenchments.

Nortons Inc. acted for Ferro in this matter.