Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC approves acquisition of Rockwood’s chemical businesses by Huntsman, (Sep 10, 2014)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) announced today that it has cleared under European Union (EU) merger regulations the proposed acquisition by Huntsman Corporation of a number of chemical businesses held by Rockwood Specialties Group, Inc.—both United States companies. The clearance is conditional upon the divestment of Huntsman's TR52 business. TR52 is Huntsman's main titanium dioxide grade used for printing ink applications (such as printing inks used in flexible packaging). Titanium dioxide is a white pigment used to whiten, brighten, and add opacity to a large variety of products, such as PVC window frames, automotive coatings, bathtubs, paper, clothing, toothpaste, cream, and cookies.

The Commission had concerns that the transaction, as originally notified, would have enabled the merged entity to raise prices of titanium dioxide for printing ink applications in the European Economic Area (EEA). The proposed transaction was notified to the EC for regulatory approval in January 2014 and in March 2014, and the Commission opened an in-depth investigation.

The Commission's investigation showed that the transaction would have combined the two leading suppliers of titanium dioxide for printing ink applications, leading to the creation of a dominant position in the EEA. The Commission's investigation also showed that the combined entity would not face sufficient competition from other titanium dioxide suppliers such as DuPont, Tronox, Kronos, and Eastern European and Asian producers, which lack the relevant know-how or incentives to expand on the market. The Commission also found that the market is characterized by high barriers to entry, mostly linked to know-how and capital expenditure requirements. Therefore, the EC had concerns that customers would have found it difficult to switch to alternative suppliers.

In July 2014, the Commission informed the parties in a statement of objections that the proposed transaction, as originally notified, raised serious competition concerns in the market for titanium dioxide for printing ink applications in the EEA.

The EC also examined the competitive effects of the proposed acquisition in the markets for titanium dioxide for cosmetics, pharmaceuticals and food, fibers, coatings, plastics and paper, as well as the markets for some by-products of the titanium dioxide production, namely ferrous sulphate and filter salts. The Commission's investigation found that Huntsman will continue to face, after the merger, significant competition in all these markets from other market participants.

To address the EC’s concerns, Huntsman offered to divest its global TR52 business, including the TR52 brand, technology and know-how, customer arrangements, and some key personnel. These commitments remove the overlap between the activities of Huntsman and Rockwood in the market for titanium dioxide for printing ink applications in the EEA. They will enable the purchaser of the TR52 business to operate a viable business in competition with the merged entity and other market participants. The companies have committed not to close the proposed transaction before concluding a binding agreement for the sale of the divestment business to a suitable purchaser approved by the Commission.

The Commission concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments.

Huntsman is a U.S. company active internationally in the chemical industry and especially in the markets for pigments (including titanium dioxide), polyurethanes, performance products and advanced materials. Rockwood is a U.S. company active in the sector of specialty chemicals and advanced materials used for industrial and commercial purposes.

The businesses of Rockwood acquired by Huntsman cover the production of titanium dioxide and functional additives, color pigments, timber treatment and wood protection chemicals in North America, water treatment chemicals, and the provision of rubber automotive spare parts.

Companies: Rockwood Specialties Group, Inc.; Huntsman Corporation

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