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UK Takes Dim View of AkzoNobel Deal

Monday, October 1, 2012

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AkzoNobel’s plan to take over Metlac Holding has hit a snag, with the UK’s antitrust agency deeming the metals coating deal a bad one for customers.

The UK Competition Commission (CC) has provisionally concluded that the proposed merger would substantially reduce competition in the supply of metal packaging coatings in the UK.

Photos: Metlac

Customers say an AkzoNobel/Metlac merger would likely increase prices.

In its Summary of Provisional Findings Report published Sept. 20, the commission cited concerns from a “significant proportion of large and small customers” that the merger would remove an irreplaceable competitive force that Metlac brings to the market.

Packaging and Decorating Coatings

Both companies manufacture and supply metal packaging coatings and metal decorating inks in the UK. According to the commission’s findings, the global production of metal coatings is concentrated in three large producers: AkzoNobel, PPG Industries Inc., and Valspar Corporation.

Metlac is an intermediate-sized producer with a strong presence in the European Economic Area (EEA).

AkzoNobel announced in January that it planned to exercise its call option and take full control of Metlac Holding, of which AkzoNobel Coatings International B.V. currently owns 49 percent.

In May, however, Britain’s Office of Fair Trading (OFT), a government consumer and competition authority, threw a wrench into the proposal, saying that the deal could undermine competition and lead to price increases. OFT then referred the proposed acquisition to the Competition Commission, an independent public agency.

The remaining 51 percent of Metlac Holding is owned by members of the Bocchio family. Metlac Holding owns 55.56 percent of its subsidiary Metlac S.p.A.; AkzoNobel owns the rest.

‘Disappointed’

AkzoNobel did not immediately respond to a request for comment. However, Oskar Bosson, Media Officer Specialty Chemicals and Performance Coatings at AkzoNobel, told FoodProductionDaily.com: “We’re disappointed with the preliminary findings, and the key here is they are preliminary findings by the CC, and we are confident we can ultimately show them the transaction should be allowed to proceed.”

Merging AkzoNobel and Metlac would combine two of the EEA’s four main metal packaging coatings suppliers, said the Competition Commission.

For its competitive effects analysis, the commission treated AkzoNobel and Metlac as independent competitors, stating that merging them would combine two of the EEA’s four main suppliers of metal packaging coatings.

If both parties were to come under common ownership and control of AkzoNobel, they would control 61-70 percent of UK’s metal packaging coatings, according to the CC’s provisional findings.

Third-Party Concerns

The commission said it had received a number of third-party concerns related to the potential loss of Metlac as a competitor.

“Metlac competes strongly with AkzoNobel, the leading player, in these markets,” Roger  Witcomb, CC Chairman and Chairman of the AkzoNobel/Metlac inquiry, said in a press release.

“A number of customers indicated that Metlac is a significant competitive force due to its low pricing, strong product quality, and innovation and that its removal would eliminate a significant competitive constraint to AkzoNobel and could therefore result in price increases.”

The CC has published a Notice of Possible Remedies to remedy the harm to competition, which includes a remedy preventing AkzoNobel from exercising its call option. The full provisional findings report will be published by Nov. 6.

The CC would like to hear from all interested parties in writing by Oct. 10 about the provisional findings and by Oct. 3 about the Notice of Possible Remedies. To submit evidence, email Matt Weighill, Inquiry Manager, Akzo/Metlac merger inquiry.