PCC flags SMC-Holcim deal

MANILA, Philippines — The Philippine Competition Commission (PCC) raised concern over the plan of a  San Miguel Corp. (SMC) subsidiary to acquire cement giant Holcim Philippines Inc., saying monopoly and potential collusion may arise from the merger.

SMC unit First Stronghold struck the deal with Holcim for the acquisition of the latter’s 85.73 percent stake or 5.53 billion common shares.

In its review, the PCC’s Mergers and Acquisitions Office (MAO) said the merger may result in a substantial lessening of competition in the market for grey cement in four key areas in the Philippines.

According to PCC, the merger eliminates Top Frontier’s only competitor in the northwest Luzon area, which will result in a monopoly in the market for grey cement.

“In Greater Metro Manila, Central Luzon, and Northeast Luzon, the transaction results in high combined market shares, allowing Top Frontier to control a majority of the supply in these areas,” the PCC said.

The competition watchdog also said the transaction increases the likelihood of firms to engage in coordinated behavior in Greater Metro Manila, Central Luzon, and Northeast Luzon.

Among the anti-trust concerns that may arise post-transaction include insufficient imports in the relevant markets to constrain the merged parties.

No new players are likely to or can timely counteract the parties’ market power in Northwest Luzon after the transaction, while any entrant is seen to have little to no ability to constrain the exercise of market power of the parties in Greater Metro Manila, Central Luzon, and Northeast Luzon, PCC said.

Holcim Philippines, a subsidiary of global cement giant LafargeHolcim Ltd.,  has eight cement facilities in the Philippines.

In contrast, First Stronghold, a holding company created for this transaction, is wholly owned by San Miguel Equity Investments  Inc., which in turn is a subsidiary of SMC – all under Top Frontier.

Top Frontier has two cement plants slated to begin commercial operations within the next two years: Northern Cement and Oro Cemento Industries Corp.

PCC said it included Northern Cement Corp. and Eagle Cement Corp. as part of the Top Frontier group in its market definition and competitive assessment in the review.

PCC alleged that Top Frontier exercises control and influence over Northern Cement’s policies and operations despite its 35 percent minority shareholding in the latter.

Under the PCC’s merger rules, voluntary commitments shall be evaluated by the commission whether or not they sufficiently address the competition concerns identified.