The European Commission has cleared under the EU Merger Regulation the proposed acquisition of a controlling stake in Compañía Española de Petróleos S.A (“CEPSA”), a Spanish integrated oil and energy company, by International Petroleum Investment Company (“IPIC”) of Abu Dhabi. After examining the operation, the Commission concluded that the merged entity would face effective competitors and that the transaction would have no effect on the merged entities’ incentives to coordinate their behaviour.
The Commission’s examination showed that the proposed transaction gives rise to horizontal overlaps in the markets for phenol and acetone. Phenol is used for producing (a) bisphenol-A (“BPA”), which in turn is used to produce polycarbonate used for different applications in optical media, electrical and electronics and in construction; (b) phenolic resin, which can be used, among other things, as a wood-binding adhesive in the construction sector, as a bonding agent for foundry, and as sand moulds in the industrial sector; (c) caprolactam, which is used to make 6-nylon fibres, engineering resins and film; and (d) slimicide, a disinfectant and an anaesthetic. Acetone is used in the production of (a) polycarbonate from bisphenol-A (“BPA”) (to produce bisphenol-A, one needs both phenol and acetone); (b) methyl methacrylate (“MMA”); and (c) solvents.
The Commission’s investigation revealed that IPIC’s and CEPSA’s combined market shares are moderate and that a number of credible competitors will remain active in the markets for phenol and acetone.
The Commission also investigated whether the operation would increase the ability and incentive of suppliers of acetone and phenol to coordinate their business conduct to the detriment of their consumers. However, the lack of transparency, the asymmetry between the market shares of various competitors (that would remain unchanged by the transaction) and the strong countervailing purchasing power of customers means that the possibility of coordination would be unaffected by the transaction.
The Commission therefore considered that the proposed transaction will not give rise to competition concerns.
IPIC is an investment company with a mandate to invest globally in energy and energy related assets. CEPSA is an integrated oil and energy company active in the upstream and downstream oil and gas sectors. Its downstream business focuses on the refining and marketing of petroleum products, such as motor fuels and petrochemical products.
The transaction was notified to the Commission on 26 June 2011.