Sika Cleared To Acquire MBCC Group Subject To Divestment

The Commerce Commission has granted clearance for Sika AG to acquire the MBCC Group subject to divesting certain assets of MBCC, including the entirety of MBCC’s business in New Zealand (Divestment Undertaking).

Both parties manufacture chemical admixtures, which are ingredients used in the production of concrete. They also supply other construction material-related products.

The parties are the two largest competitors for the supply of chemical admixtures in New Zealand, accounting for a very high combined share of supply. They are also the only two locally-based suppliers, which gives them a cost-advantage over their competitors, who import products.

The Commission therefore had concerns that competition lost with the merger would be substantial.

To address the competition concerns raised in New Zealand and in other jurisdictions, Sika has agreed to divest the entire MBCC business in New Zealand and Australia and the chemical admixtures business of MBCC in the United Kingdom, European Union, United States and Canada. The divestment includes research and development facilities, including MBCC’s global research and development facility in Trostberg, Germany.

“Sika and MBCC are by far the largest suppliers of admixtures in New Zealand. Admixtures are an important input in the manufacture of concrete, and therefore a high importance product for the building industry,” said Commissioner Dr Derek Johnston.

“Without the divestment, we are concerned that existing competitors or potential entrants would not provide enough competition to prevent Sika from raising prices or decreasing quality to customers.”

Dr Johnston said that the sale of the entire New Zealand MBCC business to a third party satisfied the Commission that the Proposed Acquisition is unlikely to substantially lessen competition.

“We consider that the divestment will mean that the competition lost with the Proposed Acquisition will be replaced by the purchaser of MBCC’s New Zealand business. Furthermore, the divestment of research and development facilities will enable the business to continue innovating. With this divestment, the Commission is satisfied that the merger would not be likely to result in a substantial lessening of competition.”

Under the terms of the Divestment Undertaking, Sika is required to obtain separate, formal approval from the Commission for the divestment of the MBCC business to its preferred purchaser.

A public version of the written reason for the decision will be available on the Commission’s case register in the near future.

Given the Commission is yet to approve a purchaser of the MBCC business we will not be commenting further at this time.

Background

We will give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.

Under the terms of the Divestment Undertaking, Sika is required to apply to the Commission for approval of the purchaser of the MBCC business. The Commission will approve a purchaser of the MBCC business if it is satisfied, among other things, that the proposed purchaser has the financial resources, business expertise and incentive to viably operate MBCC in competition with Sika and that the proposed purchaser’s acquisition of MBCC is not likely to create competition concerns that would result in a contravention of s 47(1) of the Commerce Act 1986.

Further information explaining how the Commission assesses a merger application is available on our website.

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