European competition fears cloud Cristal takeover deal
Top, Cristal’s UK plant at Stallingborough, where 370 people are employed. Bottom right, Commissioner Margrethe Vestager has initiated a phase two review by the European Commission.
By Grimsby Telegraph | Posted: 5 Jan 2018
US giant Tronox’s troubled takeover of major chemical processor Cristal faces further examination this side of the Atlantic, after the European Commission called in the proposed £1.27 billion deal.
It comes after a last-minute intervention by authorities in the States, which the New York Stock Exchange-listed company has vowed to fight as it seeks to add Stallingborough and seven other titanium dioxide manufacturing plants around the globe to its portfolio.
Chief executive Jeffry N Quinn, pictured below right, said Tronox will continue to work with Brussels officials as they seek to establish whether the deal would “significantly impede effective competition” of production on the continent, with the deal set to create the largest supplier of chloride-based titanium dioxide (TiO2) in both the European Economic Area and globally. Outside of the US, Tronox operates a plant in Rotterdam, Holland, with Cristal manufacturing in Thann, France, as well as on the Humber bank, where 370 people are employed.
Only one in ten acquisitions brought forward triggers the in-depth investigation, known as a phase two review.
Commissioner Margrethe Vestager, responsible for competition policy, said: “Titanium dioxide is used in everyday products, including paints, plastics and paper, and many different manufacturers need to buy it from a small number of suppliers. We will carefully assess whether the proposed merger between Cristal and Tronox would affect competition in the titanium dioxide market and ultimately lead to higher prices for many everyday products, or less choice for consumers.”
The Commission’s initial market investigation, conducted after being notified in November, raised several issues, relating in particular to a reduction of suppliers using the chloride-based process. Officials stated that the market is already concentrated, with Tronox and Cristal close competitors.
It said there was concern about less choice for customers and potential higher prices for the products concerned, adding: “Different types of titanium dioxide pigment are suitable for use in different products. For some of them, such as paints for buildings and specific types of plastics and paper, the number of suppliers of titanium dioxide is particularly limited. In some of these markets, the Commission is concerned that the acquisition would reduce the number of effective competitors from four to three.”
A deadline of May 15 has now been set to explore these concerns.
Mr Quinn said: “We remain actively engaged with representatives of the European Commission as they continue their analysis of our planned acquisition of Cristal’s TiO2 business.
“We believe this highly synergistic acquisition will enhance competition in the global TiO2 industry and benefit our customers around the world. We look forward to our ongoing engagement with the Commission to secure approval for this transaction in a timely manner.”
The transaction has been unconditionally cleared in Australia, China, New Zealand, Turkey, South Korea and Colombia, with a further review in Saudi Arabia, where Cristal is headquartered.
As reported, last month the Federal Trade Commission filed to block the transaction, with Mr Quinn describing the complaint as being based on “an erroneous view of the global titanium dioxide market”, and a “flawed analysis”. Cristal has two plants in Ohio, with Tronox operating in Mississippi with research and development in Oklahoma.