URC needs different business model for RHI deal

Catherine Talavera (The Philippine Star) - February 18, 2019 - 12:00am

MANILA, Philippines — The Philippine Competition Commission (PCC) said Universal Robina Corp. (URC) may pursue the purchase of the refining and milling assets of Central Azucarera Don Pedro Inc. (CADPI) and land owned by Roxas Holdings Inc. (RHI) if it proposes a different business model.

“Now the decision has been made and the window for another negotiation of voluntary commitment is over,” PCC chairman Arsenio Balisacan told reporters Friday.

“For us, the decision is already there. Perhaps if they can come back again to notify but with a different business model that they are proposing, maybe then they can renew it again,” he said.

In a decision issued Tuesday, the PCC said URC’s buyout of its only competitor in the sugarcane milling services market could lead to a monopoly in the Southern Luzon region.

The PCC earlier raised competition concerns on URC’s proposed acquisition of CADPI and RHI’s assets.

Following the competition concerns raised by the antitrust body, the parties voluntarily submitted commitments.

The PCC, however, rejected the voluntary commitments offered by the parties as such were deemed insufficient to address the competition concerns raised.

“The concern here is when the two is now controlled by one entity, then you have a control problem–you have a monopoly. If they want to pursue it, they can, it does not involve such overlap,” Balisacan said.

In a disclosure to the Philippine Stock Exchange Friday, URC said it accepts the PCC’s decision.

“URC accepts the PCC decision and affirms its commitment and support to the efforts of government for a strong market economy,” the company said.

“The decision by the PCC does not materially affect the business plans of URC, which is a leading food and beverage company in the country,” it added.

URC’s sugar mill is located in Balayan in Batangas, while CADPI-RHI’s milling facilities are in Nasugbu in the same province.

The PCC said while both mill operators are in Batangas, the monopoly to be created by the merger would substantially reduce competition even in other provinces such as Cavite, Laguna and Quezon.

It added that the sugar processed from the facilities cater to consumers nationwide, including those in Metro Manila.

“A merger-to-monopoly deal is among the most detrimental types of business transactions. The URC takeover removes its only competitor, erodes the benefits of competition for the sugarcane planters, and leaves market power at the hands of a single provider in an area,” Balisacan earlier said.

PCC’s market investigation showed farmers stand to lose the benefits of competition in terms of planters’ cut in sharing agreements, sugar recovery rates, and incentives.

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