Completed acquisition of UniQEma, a business division of Imperial Chemical Industries plc, by Croda International plc

Affected market: Chemicals

No. ME/2566/06

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 22(1) given on 10 November 2006. Full text of decision published 23 November 2006.

Please note that square brackets indicate figures or text which have been omitted or replaced with a range for reasons of commercial confidentiality.

PARTIES

Croda International plc (Croda) is a global chemicals company active in the production and supply of a wide range of chemicals for different industries.

Uniqema (Uniqema), a business division of global chemicals company Imperial Chemical Industries plc (ICI), is active in the production and supply of a range of chemicals for a wide variety of industries. Uniqema's turnover in the UK for the financial year ended 31 December 2005 was £[ ] million.

TRANSACTION

Croda has acquired, by means of a share and business purchase, Uniqema. The transaction was completed on 1 September 2006.

The transaction was notified to the OFT on 1 August 2006. The administrative deadline is 10 November.

JURISDICTION

As a result of this transaction, Croda and Uniqema have ceased to be distinct. The share of supply test in section 23(3) of the Enterprise Act 2002 (the Act) is met as their combined share of the supply of fatty acids in the UK exceeds 25 per cent as a result of the merger. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY COMMENTS

The majority of third parties were unconcerned about this merger.

A few third parties raised concerns that the merger would enable the parties to increase market power in relation to three specific types of esters, namely sorbitan esters, sorbitan mono-oleates and fatty acid amides as well as one type of alkoxylate, ethoxylated sorbitan esters (suggested by the third party as being in the same product market as sorbitan esters). Given the available evidence on the high degree of supply side substitution within different types of platform chemicals and the number of existing suppliers within the UK and Western Europe of each of these individual chemicals, these concerns appear to be exaggerated.

ASSESSMENT

This inquiry focused on the parties' overlaps in the supply of certain platform chemicals: esters, alkoxylates, fatty acids, glycerine, phosphate esters and quaternaries. There is strong evidence that the market for these is at least Western Europe and on that basis the parties combined shares of supply are less that 15 per cent for all the overlap platform chemicals.

Even if the geographic market were to be taken as the UK – which the OFT does not believe to be appropriate – at the highest the merged entity will have combined shares of supply in the UK of up to [15-20] per cent, [35-40] per cent and [15-20] per cent for esters, fatty acids and glycerine respectively. However, competition concerns do not arise in these segments given that the available evidence indicates that numerous suppliers remain, customers have some buyer power and barriers to entry are relatively low, at least for fatty acid and glycerine. Furthermore, third parties were generally unconcerned.

Consequently, the OFT does not believe that it is or may be the case that the creation of this merger situation may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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