PCC raises concern over SMC subsidiary's takover of Holcim


Posted at Feb 01 2020 06:25 AM

The Philippine Competition Commission's (PCC) Mergers and Acquisitions Office (MAO) has expressed concern that a San Miguel Corporation (SMC) subsidiary’s proposed takeover of cement giant Holcim Philippines Inc. may result in monopoly and potential collusion arising from the merger. 

MAO, in its of the proposed takeover, said the buy-out by First Stronghold Cement Industries, Inc., of Holcim Philippines will result in a substantial lessening of competition in the market for grey cement in four key areas in the Philippines.
The merger review highlighted the following antitrust concerns:

- In Northwest Luzon, the merger eliminates Top Frontier’s only competitor in the area, resulting 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.
- In Greater Metro Manila, Central Luzon, and Northeast Luzon, the transaction increases the likelihood of firms to engage in coordinated behavior.- 
- Post-transaction, imports in the relevant markets are insufficient to constrain the merged parties.
- Post-transaction, no new players are likely to or can timely counteract the parties’ market power in Northwest Luzon.
- Post-transaction, any entrant has little to no ability to constrain the exercise of market power of the parties in Greater Metro Manila, Central Luzon, and Northeast Luzon.

First Stronghold, in a deal with Holcim Philippines last year, is set to acquire a 85.73% share of Holcim Philippines. 

Holcim Philippines manufactures, sells and distributes cement and related aggregates with eight cement facilities in the Philippines and is a subsidiary of global cement giant LafargeHolcim Ltd. 

First Stronghold, a holding company created for the transaction, is wholly owned by San Miguel Equity Investments, Inc., which in turn is a subsidiary of SMC—all under Top Frontier Investment Holdings, Inc. (Top Frontier). Top Frontier has two cement plants slated to begin commercial operations within the next 2 years: Northern Cement and Oro Cemento Industries Corporation. 

MAO alleged that Top Frontier exercises control and influence over Northern Cement’s policies and operations despite its 35% minority stake shareholding in the latter. It also looked into interlocking officers and directors between Northern Cement and Eagle Cement, and between Eagle Cement and Top Frontier. 

Top Frontier and Holcim Philippines have proposed a set of voluntary commitments before the antitrust commission. Under the PCC’s merger rules, voluntary commitments shall be evaluated by the Commission whether or not they sufficiently address the competition concerns identified by MAO. 

SMC, in a statement, however, said its acquisition of Holcim "will be beneficial to consumers".

"We are aware of the concerns raised by the Philippine Competition Commission (PCC) on the company’s proposed acquisition of Holcim Philippines, and are committed to achieving a favorable outcome of the review process," it said.

"We firmly believe that the acquisition of Holcim by San Miguel Corporation, a Filipino company, will be beneficial to consumers, the industry, and our country’s development," it added.