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UK Puts Brakes on AkzoNobel Deal

Friday, May 25, 2012

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Britain’s Office of Fair Trading has thrown a flag on AkzoNobel’s plan to take over packaging coatings maker Metlac, saying the deal could well undermine competition and lead to price increases in that industry.

The government agency announced that it had referred the proposed acquisition to the UK’s Competition Commission in the wake of its own investigation and “a number of third-party concerns” registered over the deal.

 A leading global supplier, Metlac produces 25,000 tons of metal lacquers, coatings and linings each year.

 Metlac

A leading global supplier, Metlac produces 25,000 tons of metal lacquers, coatings and linings each year.

“A number of customers indicated that the removal of Metlac would eliminate a significant competitive constraint to Akzo Nobel and would therefore result in price increases,” OFT reported Wednesday (May 23).

OFT is a government consumer and competition authority, similar to the U.S. Federal Trade Commission. The Competition Commission is an independent public agency that conducts in-depth inquiries into mergers, markets and the regulation of major industries.

Proposed Takeover

AkzoNobel, the world’s largest paint and coatings company, currently owns 49 percent of Italy-based Metlac. AkzoNobel inherited that stake in 2008 when it acquired ICI.

AkzoNobel announced in January that it planned to take full control of Metlac, closing the deal in the second quarter of 2012.

Terms of the transaction were not disclosed. 

Founded in 1986, Metlac is the leading company of a group that includes an R&D firm, an ink manufacturer and a can coating business.

The Metlac Group is a major global supplier of lacquers, coatings and linings for metal cans and packaging, producing 25,000 tons annually.

‘Detailed Investigation’

AkzoNobel and Metlac both manufacture and supply metal packaging coatings used in food and beverage cans. Between them, the companies supply close to half of the 30-nation European Economic Area (EEA) market, according to OFT.

As the No. 2 packaging coatings supplier to the EEA, Metlac helps keep AkzoNobel’s dominance in check and is considered “especially price competitive.”

“Metlac stands out as a particularly close competitor to Akzo Nobel, the leading player, in this market,” said Ali Nikpay, OFT Senior Director, the decision maker in the case.

“The transaction will benefit from a more in-depth and detailed investigation by the Competition Commission to assess the competitive effects of taking Metlac out of the marketplace.”

Austria, Germany and Cyprus have approved the deal, while “competition authorities” in Russia, Turkey and Pakistan are still reviewing the deal.

Initial Findings

OFT found that the two coatings companies currently “actively compete against each other to supply metal packaging coating products.”

The agency said it “has a duty” to refer the case to the Competition Commission if it believed the merger would create a situation that “may be expected to result in a substantial lessening of competition” in the United Kingdom.

OFT has the authority to refer to the Competition Commission any proposed or completed mergers that would “create or enhance a 25 percent share of supply” in the UK.

The commission is seeking public input on the proposed merger by June 13. Comments and evidence may be emailed to Akzo.Metlac@cc.gsi.gov.uk or mailed to Inquiry Manager, Akzo/Metlac merger inquiry, Competition Commission, Victoria House, Southampton Row, LONDON, WC1B 4AD.

The commission’s decision is expected by Nov. 6.

   

Tagged categories: AkzoNobel; Business operations; Market; Mergers

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