South African competition watchdog blocks chemicals merger.

By bne IntelliNews January 26, 2012
South Africas Competition Commission said it has blocked a bid by Senmin International, a unit of South African chemicals and explosives firm AECI, to acquire local chemical manufacturer Cellulose Derivatives. The target firm, Cellulose Derivatives, is the only local manufacturer of technical grade carboxymethylcellulose (CMC), which is mainly used in platinum mines for mineral extraction, the commission said in a statement. Cellulose Derivatives sells this product to distributors in the country, with Senmin being the biggest distributor [] there is no direct interaction between the end-customers and the manufacturer. A potential acquisition of Cellulose Derivatives by Senmin will create a market structure, in which Senmin, a dominant distributor of CMC, will be vertically integrated with the only producer of CMC in the country. The commission is of the opinion that after the acquisition Senmin is likely to deny other distributors access to an essential input. This is the second time the commission has prohibited the merger of Senmin and Cellulose Derivatives. The first time was in 2009 and the reasons were the same. Cellulose Derivatives is run by a sole proprietor who wants to sell his business, but has not been successful in finding another buyer. According to experts close to the deal, the business could in the end be shut down and the equipment, warehouse and land sold off, if the decision by the commission is not taken on review before the Competition Tribunal or if the review is not successful, Business Day reported.

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