LONDON (ICIS)--The European Commission on Monday opened an “in-depth” investigation into the proposed acquisition of Solvay’s global nylon business by BASF under the EU merger regulation.
The EU's executive body said that it was “concerned that the merger may reduce competition in the supply of key inputs" in the European nylon production chain.
It added that it was particularly concerned the transaction could lead to higher prices due to the increased market power of the merged entity.
BASF announced in September 2017 it was aiming to acquire the Belgian chemical major’s integrated polyamide business for €1.6bn, and was aiming to close the transaction in the third quarter of this year.
"Nylon is used in everyday products like clothes, sports shoes and carpets. But it's also an important industrial input, for example contributing to make lighter engines and cars,” said Margrethe Vestager, the competition Commissioner.
“However, only a few manufacturers provide essential inputs to produce different nylon products, so we need to carefully assess whether the proposed acquisition would lead to higher prices or less choice for European businesses and, ultimately, consumers.”
BASF and Solvay had not responded to a request for comment at the time of writing.
According to the Commission, the resulting entity post-transaction would have a market size "almost double" that of the closest competitor, as well as control substantial parts of the merchant markets and of the production capacities at all levels of the nylon production chain.
"Moreover, no other player would be similarly fully integrated in the production chain. Competitors will thus depend on the merged entity to continue to supply them with one or more essential inputs," it said.
"In addition, there is no indication that competition could be preserved by new entrants, since access to essential inputs (such as ADN [adiponitrile, a feedstock for nylon production]) is limited and critical to be able to compete effectively."
The Commission has until 31 October to make a decision on its investigation.
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