BASF has announced that the EU Commission has granted conditional clearance for BASF to acquire Solvay’s polyamide business. This approval is an important milestone for the transaction.
Closing is expected in the second half of 2019 after all remaining closing conditions have been fulfilled, including the sale of a remedy package to a third party.
Commissioner Margrethe Vestager, in charge of competition policy, said: "Nylon is used in many different types of products, not only textile or carpets but also in car components, to make them lighter and more environmentally friendly. Our decision will allow for the creation of a significant European player in this market because the commitments offered by BASF and Solvay ensure that the merger will not lead to higher prices or less choice for European businesses and, ultimately, consumers."
The Commission's Investigation
Following its in-depth market investigation, the Commission identified the following competition concerns with the transaction as originally notified:
- It would lead to a reduction of the number of suitable suppliers and likely price increases in a number of markets related to the nylon industry in the European Economic Area (EEA): the markets for ADN, a key upstream input for the nylon 6.6 value chain, but also hexamethylene diamine, adipic acid, hexamethylenediamine adipate salt, nylon 6.6 base polymer, nylon 6.6 engineering plastics and nylon 6 3D printing powder.
- Due to the limited number of suppliers of intermediate products, the merged entity would also have the ability and incentive to restrict its competitors' access to essential inputs including ADN, hexamethylene diamine, adipic acid, hexamethylenediamine adipate salt, and nylon 6.6 base polymer in the EEA.
In addition, there was no indication that the existing level of competition could be maintained by new entrants because of high barriers to entry in these markets. In particular, access to essential inputs is limited and critical to be able to compete effectively.
Proposed Transaction – Subject to Conditions
During the approval process in Europe BASF made commitments to address the competition concerns of the EU Commission. They require divesting parts of the original transaction scope to a third-party buyer, namely manufacturing assets and innovation capabilities of
Solvay’s polyamide business in Europe. The divestment process started in Q4 2018.
BASF and Solvay offered the following commitments:
- The divestiture of Solvay's facilities at Belle-Etoile and Valence (France), Gorzow (Poland), and Blanes (Spain) to a single suitable buyer. These facilities produce hexamethylene diamine, hexamethylenediamine adipate salt, nylon 6.6 base polymer, nylon 6.6 engineering plastics and nylon 6 3D printing powder.
- The creation of a production joint venture in Chalampé (France) between the merged entity and the buyer of the divested assets, for the production of adipic acid.
- Long-term supply agreements for ADN to meet the divestment business' requirements.
The polyamide businesses to be acquired in the Americas and in Asia are not affected by the commitments.
BASF will achieve key strategic objectives from the acquisition and strengthen its polyamide 6.6 business significantly. The acquisition will complement BASF’s engineering plastics portfolio, enhance the access to key growth markets in Asia and South America as well as strengthen the value chain through backward integration into key raw materials such as ADN (adipodinitrile).
Source: BASF and EU Commission