Universal Robina Corp. (URC) said it has received regulatory approval for the sale of and Roxas Holdings Inc.’s (RHI) La Carlota operation in La Carlota City, Negros Occidental, under Najalin Agri-Ventures Inc.
“The acquisition by URC of the sugar milling and bio-ethanol distillery assets will create synergies in the sugar industry in Negros Occidental. This transaction is expected to enhance capability of URC to provide good milling services to the sugarcane planters,” URC said.
“Aside from the operational synergies that will be achieved between La Carlota and existing URC operations in sugar, the acquisition is also intended to help sugarcane planters increase their productivity, as well as help local communities in Negros Occidental by providing more opportunities. In addition, the acquisition will allow URC to continue in its efforts to support the development of the sugar industry in the Philippines,” URC said.
URC will acquire the buildings, improvements, machineries and equipment, and laboratory equipment, as well as the parcels of land where the assets are built, necessary for the continuing operation of the sugar milling plant.
The Philippine Competition Commission (PCC) in its decision said the transaction does not lead to substantial lessening of competition in the sugarcane milling and tolling markets in Negros region, as well as the national markets for bioethanol, wholesale raw sugar, and molasses.
Specifically, the PCC’s merger review of the URC-CA Carlota deal showed that the Negros regional market for sugar cane milling services is sufficiently competitive with planters able to switch easily among the different competing mills.
The PCC also said the transaction will not increase the likelihood of, or strengthen existing, coordination among market players.
The PCC last year thumbed down a similar transaction between URC and RHI for the former’s purchase of the latter’s Central Azucarera Don Pedro in Batangas.
The PCC then said the acquisition of the milling operation, URC’s sole competitor in the area, will lead to a monopoly of sugar milling services and will corner farmer-planters in their sharing agreements, sugar recovery rates, and incentives in Southern Tagalog.
“The acquisition by the same parties over the assets in Negros, however, presents a different market environment considering the many players, planters’ strength in numbers translated as bargaining power, and the competitive constraints throughout the country’s sugar producer capital,” the PCC said.
“The PCC merger review also found that unlike in the Batangas deal where sugar planters had to choose between two players and would have lost the benefit of competition in their merger, majority of Negros sugarcane farmers work in associations with bargaining power where planters are able to switch to get the best price for their produce and competing millers in the area respond accordingly in price and incentives to draw in the farmers’ haul and deal,” it added.