| Tue 24 Jan 2012, 14:30 | | THEE - The Competition Commission - Competition Commission prohibits |
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JSE
THEE
THEE - The Competition Commission - Competition Commission prohibits
chemicals merger
MEDIA RELEASE
24 January 2012
Competition Commission prohibits chemicals merger
The Competition Commission has prohibited the proposed acquisition of
Cellulose Derivatives (Pty) Ltd ("Cellulose Derivatives") by Senmin
International (Pty) Ltd ("Senmin"). The merger filed with the Commission was
essentially the same transaction that was previously prohibited by the
Commission in February 2009.
The Commission then was concerned about the likelihood of foreclosure
resulting from the merger. In the investigation of the new transaction, the
Commission found that market dynamics have not substantially changed since
2009 and concerns of foreclosure remain.
The acquiring firm, Senmin is a wholly-owned subsidiary of Chemical Services
Limited, which is controlled by AECI Limited and is involved in the
manufacture, marketing and distribution of mining chemicals. The target
firm, Cellulose Derivatives is the only local manufacturer of technical
grade carboxymethylcellulose (CMC) which is mainly used in platinum mines
for mineral extraction. Cellulose Derivatives sells this product to
distributors in the country, with Senmin being the biggest distributor.
A striking feature of this industry is that there is no direct interaction
between the end-customers and the manufacturer as all mining houses source
their CMC requirements through distributors. This is largely because
Cellulose Derivatives which manufactures the base CMC does not have chemical
engineers who are required to blend the CMC to the mines specifications.
Distributors such as Senmin have chemical engineers who ensure that the CMC
meets its customers` requirements.
As such, the merger will create a market structure in which Senmin, a
dominant distributor of CMC, will be vertically integrated with the only
producer of CMC in South Africa. Consequently, the Commission is concerned
that the transaction presents substantial foreclosure concerns in that the
merging parties are likely to deny Senmin`s competitors access to an
essential input, CMC.
ENDS
For further details contact:
Molebogeng Taunyane, Coordinator: External Communication
012 394 3289/082 646 8663/ molebogengt@compcom.co.za
Date: 24/01/2012 14:30:30 Produced by the JSE SENS Department.
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