PCC: Cement M&A to create monopoly

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    BALISACAN
    BALISACAN

    The Philippine Competition Commission (PCC) said the proposed takeover by one of the country’s conglomerates of a cement manufacturer will give the merged body market control of cement in virtually all regions of the Philippines.

    The PCC in particular identified the following regions where concentrated market control on cement will take place if and San Miguel Corp. takes over Holcim Philippines Inc.: Northeast Luzon (Region II and the Cordillera Administrative Region), Northwest Luzon (Ilocos Norte, Ilocos Sur, La Union, and Pangasinan), Central Luzon (Region III), National Capital Region, Southern Luzon (Regions IV-A, IV-B, and V), Northern Mindanao (Regions IX, X, XIII, and the Autonomous Region of Muslim Mindanao), Southern Mindanao  (Compostela Valley, Davao del Norte, Davao del Sur, Davao Occidental, Davao Oriental, Davao City, South Cotabato, Cotabato, Sultan Kudarat, Sarangani, and General Santos City) With this, the

    PCC said it is now into the Phase 2 of its review of the acquisition of Holcim to see how substantial the concentration will be once the merger with San Miguel’s own cement business is approved, particularly in the markets of grey cement, clinker, ready-mix-concrete, and aggregates markets.

    “The commencement of Phase 2 review signifies that a more detailed analysis of the transaction is required using additional information from the parties and stakeholders,” the PCC said.

    “The second-level inquiry is set to determine if the merger of two of the biggest cement manufacturers in the country—SMC’s (San Miguel) cement-manufacturing subsidiaries and Holcim—will likely lead to a substantial lessening of competition in the relevant markets,” it added.

    San Miguel manufactures cement through Northern Cement Corp. and through a joint venture interest with Northern Cement and subsidiary Oro Cemento in two upcoming plants.

    The acquiring entity, First Stronghold Cement Industries Inc. is a wholly-owned subsidiary of San Miguel Equity Investments Inc., which in turn is a wholly-owned subsidiary of San Miguel.

    The PCC also noted San Miguel’s president, Ramon Ang, is also a majority owner and chairman of Eagle Cement. Ang has maintained that Eagle is independent of San Miguel’s cement business.

    The PCC said the phase two review will also assess whether or not there will be an increased likelihood of “cartel-like coordination among cement firms” operating in the identified geographic areas.

    “The PCC notes that cement is a commodity with low product differentiation where brands undergo the same quality standards. While the transaction is national in scope, the initial review shows that geographic markets by region affect retailers and consumers differently in terms of production, distribution and price,” it said.

    “The PCC acknowledges the importance of the cement industry and the role of market players in the government’s Build, Build, Build program.  As the country’s antitrust authority, the PCC reviews mergers to ensure transactions do not lead to substantial lessening of competition in the affected markets,” it added.