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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM170Mar20
In the matter between
NOURYON CHEMICALS INTERNATIONAL B.V. Primary Acquiring Firm
And
CP KELCO OY Primary Target Firm
Panel : Mr E Daniels (Presiding Member)
: Ms A Ndoni (Tribunal Member)
: Prof F Tregenna (Tribunal Member)
Heard on : 27 May 2020
Order Issued on : 27 May 2020
Reasons Issued on
: 24 June 2020
REASONS FOR DECISION
APPROVAL
[1] On 27 May 2020, the Competition Tribunal (“Tribunal”) unconditionally
approved a large merger between Nouryon Chemicals International B.V. and
CP Kelco Oy.
[2] The reasons for the approval of the proposed transaction follow.
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PARTIES TO THE PROPOSED TRANSACTION
Primary acquiring firm
[3] The primary acquiring firm is Nouryon Chemicals International B.V.
(“Nouryon”), a firm incorporated under the company laws of the Netherlands.
Nouryon does not control any firms operating in South Africa. Nouryon is
controlled by funds managed by affiliates of The Carlyle Group (“Carlyle”).1
[4] Carlyle is not controlled by any firm. Carlyle and the relevant portfolio
companies controlled by funds managed by its affiliates , including Nouryon,
shall be collectively referred to as the acquiring group.
[5] Nouryon is a global manufacturer and supplier of specialty chemicals . It
produces a wide range of chemicals such as salt, chlorine , chemical
intermediates and carboxymethyl cellulose ( “CMC”).2 Nouryon supplies CMC
into a number of industries including building and construction, food, health care
and personal care. The CMC produced by Nouryon is currently supplied to the
South African market through two firms.3
Primary target firm
[6] The primary target firm is CP Kelco Oy (“CP Kelco”), a firm incorporated under
the company laws of Finland. CP Kelco controls CP Kelco B.V ., but does not
control any firms operating in South Africa. CP Kelco is ultimately controlled by
the J.M. Huber Corporation (“Huber”).4
[7] From its Finnish plant, CP Kelco manufactures and distributes a complete line
of CMC grades to customers in over 80 countries. It supplies CMC to the South
African market through two firms with a local presence .5 CP Kelco also sells
1 Carlyle is a global alternative asset manager and has offices in the United States of America.
2 Nouryon produces CMC from one site located in the Netherlands, and another site in Italy.
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4 Huber is a corporation organized and existing in the New Jersey, in the United States of America.
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directly to other firms in South Africa on an ad hoc basis . The vast majority of
CP Kelco’s sales in South Africa are from 6
PROPOSED TRANSACTION AND RATIONALE
[8] The acquiring group intends to acquire 100% of CP Kelco’s shares. Post -
merger, the acquiring group will have sole control of CP Kelco.
[9] The rationale for the proposed transaction is stated as combining two highly
complementary businesses to deliver a number of significant benefits, including
establishing a more diverse product portfolio by adding CP Kelco’s capabilities
to Nouryon’s portfolio of CMC products. Customers of both Nouryon and CP
Kelco would benefit from a broader set of solutions.
RELEVANT MARKET AND IMPACT ON COMPETITION
[10] The Competition Commission (“Commission”) considered the activities of the
merging parties and found that the proposed transaction raised two overlaps.
The first being a vertical overlap in the global market for the supply of
monochloroacetic acid, caustic soda and other chemicals used as inputs in the
production of CMC . However, the Commission did not assess this market in -
depth as no South African firms currently purchase CMC inputs from the
acquiring group.7
[11] The second overlap found was a horizontal overlap in the supply of CMC. The
Commission concluded that the relevant market for its assessment of the
proposed transaction’s effect on competition, was the supply of CMC in South
Africa.
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7 The Commission found that Nouryon is already vertically integrated backward into this CMC input
market.
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[12] In its assessment of this market, the Commission found that the merged entity
would have a market share accretion above 30% with a post-merger market
share below 3 5%. As a result, t he Commission found that Nouryon, an
insignificant local competitor of CP Kelco (given its market share ), would
essentially replace CP Kelco as a supplier of CMC in South Africa. As such, the
Commission found that the proposed transaction would not significantly change
the structure of the CMC market in South Africa.
[13] The Commission also found th at Senmin International (Pty) Ltd (“Senmin”) is
the only producer of CMC in South Africa. Senmin has a market share below
35%, with i mports account ing for the remaining majority market share . The
Commission found that although Senmin may face increased competition in this
market, this would ultimately be favourable to end users. Additionally, Senmin
is not reliant on the acquiring group for the supply of its CMC inputs.
[14] The Commission contacted the various intermediaries used by the merging
parties that import CMC into South Africa. The intermediaries raised no
concerns regarding the proposed transaction, and further indicated that they
had alternative suppliers of CMC should the need arise.
[15] Due to the above , the Commissi on concluded that the proposed transaction
was unlikely to substantially lessen or prevent competition in the market for the
supply of CMC in South Africa. We found no reason to disagree.
PUBLIC INTEREST
[16] The Commission found that as the merging parties do not have any employees
in South Africa, no duplications or redundancies would occur in South Africa.
[17] The merging parties also confirmed that the supply and distribution agreements
entered into with the South African chemical intermediary firms would continue,
and that there were no plans to cancel any of these agreements.
[18] As a result , the Commission conc luded that the merger does not raise any
[18] As a result , the Commission conc luded that the merger does not raise any
employment concerns and that the proposed transaction raises no other public
interest concerns.
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CONCLUSION
[19] In light of the above, we concluded that the proposed transaction was unlikely
to substantially prevent or lessen competition in the stated market. In addition,
we are of the view that no public interest concerns arise from the proposed
transaction.
[20] Accordingly, we approved the transaction without conditions.
24 June 2020
Mr E Daniels Date
Ms A Ndoni and Prof. F Tregenna concurring
Tribunal Case Manager:
P Kumbirai
For the Merging Parties: R van Rensburg & S Madlala of ENSafrica
For the Commission: S Molefe & M Aphane