Anticipated acquisition of the cellulose acetate flake, tow and filament business of Acetate Products Limited by Celanese Corporation

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 33(1) given on 8 November 2006. Full text of decision published 28 November 2006.

Please note that the square brackets indicate figures or text which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.

PARTIES

Celanese Corporation (Celanese) is a global chemicals company active in the production and supply of cellulose acetate products, among other chemicals. Through its subsidiary Celanese Acetate LLC, Celanese is active in the production and supply of cellulose acetate flake (flake) and cellulose acetate tow (tow). Celanese exited the cellulose acetate film (film or filament) business in 2005. Celanese is partially vertically-integrated upstream in the production and supply of acetic acid and acetic anhydride to produce flake and tow. 

Acetate Products Limited (APL), the cellulose acetate business of Corsadi BV, is active in the production and supply of flake, tow and filament. APL is partially vertically-integrated upstream in the production of acetic acid and acetic anhydride but all of its production is used internally. APL's turnover in the UK for the financial year ended 31 December 2005 was approximately [ ].

TRANSACTION

Celanese intends to acquire, by means of a business sale, the APL business for the manufacture, distribution and sale of flake, tow and film, including related freehold and leasehold property, equipment, stock, contracts, goodwill and intellectual property rights (the APL business).

The transaction was announced on 29 August 2006. On 8 September 2006, the parties notified the proposed acquisition to the OFT. The administrative deadline is 3 November 2006. The parties have informed the OFT that in the EEA the transaction has also been notified to, and cleared by, the German Federal Cartel Office, the Austrian Federal Competition Authority and the Lithuanian Competition Council.

JURISDICTION

Celanese and the APL business will cease to be distinct as a result of these arrangements. The acquisition satisfies the share of supply test set out in section 23(3) of the Enterprise Act 2002 (the Act), and therefore gives rise to a relevant merger situation, since the parties together will have a share of supply of over 25 per cent in the supply of tow in the UK.

THIRD PARTY CONCERNS

The majority of customers expressed varying degrees of concern about this merger consistent with the unilateral effects theory set out above. These concerns, and the validity of this theory, have been addressed. No competitor raised foreclosure concerns.

ASSESSMENT
 
The OFT's inquiry focused on the parties' overlap in the production and supply of tow. The merger will result in a reduction of major global tow suppliers from five to four (four to three on a transatlantic or EEA basis) and the post-merger shares of capacity and sales and increment are significant, in an industry with substantial capacity constraints in recent years.

As developed in greater detail above, however, the OFT does not believe that the merger will lead to durable competitive harm to EEA – and in particular UK – customers. The OFT's unilateral effects theory found insufficient support in the evidence. The customers are principally global tobacco companies with the ability to leverage their global demand and adjust their procurement strategies to discipline post-merger price increases. This response is credible because customers can turn to Asian suppliers and in particular to Daicel, a Japanese importer, to replicate the competitive constraint that APL posed on Celanese and its principal transatlantic rivals, Rhodia and Eastman. Daicel has already demonstrated its ability to serve European demand, and has committed capacity expansion plans, which, given the dynamics of supply and demand in Asia, will include capacity available to serve European demand. Equally, the capacity constraints of Celanese's other rivals are also expected to slacken, thereby facilitating customers' ability to distribute and adjust their demand across suppliers to constrain price increases. Finally, there was a lack of evidence available to the OFT to support a cogent coordinated effects theory in this sector.

On the weight of the evidence, therefore, the OFT accepts the possibility that the merger may result in adverse effects in the very short term, but does not believe that these will be durable. As globally-active customers and competitors have the ability and incentive to discipline the merged firm, any lessening of competition cannot in the OFT's judgment be described as substantial.

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 33 (1) of the Act.

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