UK refers AkzoNobel can coating merger to competition chiefs over price hike fears
The OFT yesterday referred the touted merger to the UK Competition Commission after saying it had received a slew of objections to the transaction unveiled earlier this year.
Price hike fears
A probe by the body found that Akso Nobel and Metlac are two of the four main suppliers of metal packaging coatings for such segments as food and beverage cans in the European Economic Area (EEA).
“Evidence considered by the OFT shows that Metlac represents a significant competitive constraint to AkzoNobel and is considered to be especially price competitive in the supply of metal packaging coatings by customers,” said the OFT yesterday.
Ali Nikpay, OFT senior director and case decision maker, said that Metlac stood out as a “particularly close competitor” to market leader Akzo Nobel.
“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,” he added.
Buyout clause
AkzoNobel has an existing 49% stake in Metlac, after inheriting the Italian metal coating company following the acquisition of ICI in 2008, as well as owning 44% of a Metlac subsidiary.
The chemical and coating giant decided in January 2012 to exercise a pre-existing contract clause to buy the remaining stake in Metlac.
"This acquisition will reinforce our customer offering and links perfectly with the strategy to strengthen our positions in core markets", said executive committee member responsible for Performance Coatings Leif Darner at the time.
In the course of its investigation, the OFT noted AkzoNobel’s stake in the company but concluded “the two parties operations and activities in the manufacture and supply of metal packaging coatings are undertaken independently” and that the companies “actively compete against each other to supply metal packaging coating products.”
“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," said the OFT.
The Competition Commission is set to deliver its verdict by 6 November.
An AkzoNobel spokesman confirmed to FoodProductionDaily.com the company had received the OFT notification.
“As it is an on-going case we cannot comment specifically but this transaction has already been approved by competition authorities in Germany, Austria and Cyprus,” he added.
The OFT said the case is also currently under consideration in Russia, Turkey and Pakistan.
