Antitrust Law Daily Wrap Up, TOP STORY: FTC challenges $982 merger of Canadian chemical suppliers, (Jun 27, 2016)

By Linda O’Brien, J.D., LL.M.

The FTC has moved to block the proposed $982 million merger of Canadian chemical suppliers Superior Plus Corp. and Canexus Corp. on the grounds that the deal would violate the antitrust laws by significantly reducing competition in the North American market for sodium chlorate—a commodity chemical used to bleach wood pulp that is then processed into paper, tissue, diaper liners, and other products.

Superior Plus, based in Toronto, and Canexus, headquartered in Alberta, are two of the three major producers of sodium chlorate in North America. In October 2015, Superior Plus announced that it had reached an agreement to acquire Canexus in order to expand its specialty chemicals platform. If the merger takes place, the new company and rival AkzoNobel will control approximately 80 percent of the total sodium chlorate production capacity in North America.

According to the FTC announcement today, the agency’s complaint alleges that there are no viable substitutes for sodium chlorate in the pulp bleaching process, and that there are no meaningful imports to compete against the North American producers. By combining more than half of all North American sodium chlorate production capacity in the merged Superior and Canexus, the acquisition is likely to lead to anticompetitive reductions in output and higher prices, the FTC claims.

Additionally, by removing Canexus as an independent sodium chlorate producer, with its large scale and low-costs, the acquisition will also increase the likelihood of coordination in an already vulnerable market, according to the Commission. Because building a new manufacturing facility would be time-consuming and costly—estimated at $200 million—barriers to new entry and expansion are high and entry is unlikely.

The agency is seeking a temporary restraining order and a preliminary injunction in federal court to prevent the parties from consummating the merger and to maintain the status quo pending the administrative proceeding.

The FTC collaborated with the Canadian Competition Bureau in its investigation.

In a June 20 statement, Superior Plus indicated that the waiting periods under the Canada Competition Act and HSR Act had expired and the company had not reached agreement with the FTC on a divestiture package, which would address the agency’s concerns and allow the transaction to close.

Companies: Superior Plus Corp.; Canexus Corp.

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