San Miguel buyout of Holcim worries competition watchdog

PCC Logo e1567684245372 - San Miguel buyout of Holcim worries competition watchdog

THE Philippine Competition Commission (PCC) has raised concerns regarding San Miguel Corp.’s (SMC) proposed $2.15-billion acquisition of Holcim Philippines Inc. (HPI), saying the deal could lessen competition in the grey cement market in Luzon.

In a statement on Friday, PCC’s mergers and acquisitions office (MAO) found that “the buyout by SMC subsidiary, First Stronghold Cement Industries, Inc., of Holcim Philippines will result in a substantial lessening of competition in the market for grey cement,” in greater Metro Manila as well as in northwest, central and northeast Luzon.

SMC and HPI announced in May last year the $2.15-billion deal, which is considered a notifiable transaction under the Philippine Competition Act of 2015.

First Stronghold, a subsidiary of San Miguel Equity Investments, Inc., will buy 85.73% of the local arm of Switzerland-based LafargeHolcim, Ltd.

“First Stronghold, a holding company created for this transaction, is wholly owned by San Miguel Equity Investments, Inc., which in turn is a subsidiary of SMC—all under Top Frontier Investment Holdings, Inc.,” MAO said.

It added that Top Frontier has two cement plants set to begin commercial operations within the next two years: Northern Cement Corp. and Oro Cemento Industries Corp.

MAO said that in northwest Luzon, the merger would “eliminate Top Frontier’s only competitor in the area, resulting in a monopoly in the market for grey cement.”

It said the merger “increases the likelihood of firms to engage in coordinated behavior” in greater Metro Manila, central and northeastern Luzon.

“No new players are likely to or can timely counteract the parties’ market power” in northwest Luzon, it said.

MAO also said that “any entrant has little to no ability to constrain the exercise of market power of the parties” in greater Metro Manila, central and northeast Luzon.

The review also covered Northern Cement and Eagle Cement Corp. as part of the Top Frontier group.

SMC President and Chief Operating Officer Ramon S. Ang is the majority owner and chairman of Eagle Cement Corp.

MAO found that Top Frontier “exercises control and influence over Northern Cement’s policies and operations despite its 35% minority stake shareholding in the latter.”

It said Top Frontier and Northern Cement have “coordinated marketing strategies and exert influence on the board of directors of each other.”

Top Frontier, MAO also said, has access to Northern Cement’s “sensitive” corporate information.

“Sellers, distributors, and hardware owners in the relevant markets viewed Eagle Cement and Northern Cement as ‘sister companies’ and part of the Top Frontier group,” it noted. — Arjay L. Balinbin

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