The European Commission has approved, under the EU Merger Regulation, the proposed acquisition of Omnova by Synthomer, both manufacturers of specialty chemicals. The approval is conditional on the divestment of a remedy package.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Specialty chemicals, including vinyl pyridine latex, are essential inputs in many consumer products, notably in the production of tyres for the automotive industry. Synthomer and Omnova are the only two manufacturers of this type of latex in Europe but we can approve their merger because the companies offered to divest all of Synthomer’s VP Latex production, thus preserving for customers the competitive situation in the market”.
Omnova and Synthomer are both manufacturers of speciality chemicals, including vinyl pyridine latex (“VP Latex”). This chemical product is primarily used by tyre manufacturers to provide safer and more solid tyres to the automotive industry.
The Commission’s investigation
The Commission had concerns that the transaction, as originally notified, would have reduced competition on the market for the supply of VP Latex.
In particular, the Commission’s market investigation confirmed that the market for the supply of VP Latex in the European Economic Area (EEA) is highly concentrated, as Synthomer and Omnova are the only two players with production capacity in the EEA and the market is characterised by high barriers to trade across regions.
The acquisition would therefore have likely led to higher prices, reduced choice in products and lower quality of services provided to customers.
The proposed remedies
To address the Commission’s competition concerns, Synthomer offered to divest its global VP Latex business.
The divestment includes the full transfer of the required technology, brands, manufacturing equipment, and other intangibles assets to a manufacturer with the proven knowledge regarding the relevant chemistry.
The commitments fully address the Commission’s concerns as they remove the entire overlap between Synthomer and Omnova’s activities in VP Latex. The commitments also ensure that the same number of suppliers will remain active on the market of VP Latex and that customers continue to enjoy the same level of choice.
The Commission therefore concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments.
Companies and products
Synthomer plc, headquartered in the UK, develops and manufactures specialty chemicals for use in a variety of applications, such as medical gloves, paper, carpet, bedding, footwear, coatings, adhesives and cement. Its activities are mainly concentrated in Europe.
Omnova Solutions, Inc., headquartered in the US, develops and manufactures specialty chemicals and thermoplastic films for a variety of applications, such as coatings, adhesives, films, oil and gas, plastics, rubber, paper, carpet and coated fabrics. Its activities are mainly concentrated in the US.
Merger control rules and procedures
The transaction was notified on 15 November 2019.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) or that have been referred to it (see Article 4(5) of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II). This deadline is extended to 35 working days in cases where remedies are submitted by the parties, such as in this case.