Ineos-Solvay PVC Venture Said to Face In-Depth EU Probe
Ineos Group Holdings and Solvay SA (SOLB), Europe’s two biggest makers of polyvinyl chloride, face an in-depth European Union probe into their 4.3 billion-euro ($5.8 billion) PVC merger, two people familiar with the matter said.
The European Commission will decide to extend its competition review by 90 working days before today’s deadline, according to the people who didn’t want to be identified because the decision isn’t public. The companies’ offer to sell a PVC-production plant in Germany wasn’t sufficient to alleviate regulatory concerns, the people said.
The proposed combination, announced in May, would allow the enlarged business to cut costs in areas from transport to marketing and raise profitability amid a European industry suffering from inflated raw material and energy costs. The PVC market is facing overcapacity and weak demand in Europe, prompting companies in the labor-intensive and power-hungry industry to explore mergers. Solvay has said it plans to exit the PVC venture at a later stage.
“A lot of jobs downstream depend on PVC, and the industry is going through a very tough time,” said Paul Hodges, chairman of International EChem, which advises chemical companies on strategy. “It’s a perfect storm domestically in Europe, with a combination of high oil prices and construction being in a bad way, whilst U.S. producers have an enormous feedstock advantage in export markets due to shale gas.”
Solvay shares fell 1.4 percent to 115.35 euros in Brussels trading, as of 1:10 p.m.
Caroline Jacobs, a spokeswoman for Solvay in Brussels, said the company was confident that EU regulators would ultimately approve the deal. The commission “may require” that the benefits of the commitments “be demonstrated in a phase 2 review,” she said.
Richard Longden, a spokesman for Rolle, Switzerland-based Ineos, declined to immediately comment. Antoine Colombani, a spokesman for the commission, the EU’s antitrust authority, declined to comment on the decision.
Strategic Value Partners LLC’s Vestolit GmbH was among bidders for the Ineos plant in Schkopau, Germany, that the companies offered to sell, two people said last month. The site is valued at about 60 million euros, they said.
With low energy and raw-material costs in the U.S., there’s also scope for players there to transport semi-finished vinyl materials to Europe for final processing at local plants. U.S. companies in the industry include Westlake Chemical Corp.
“In terms of potential buyers, the best fit is clearly with a European player,” Hodges said. “With Kem One out of the running due to their administration, Vestolit have an obvious interest as an existing German producer with currently just the Marl site.”
To contact the reporter on this story: Aoife White in Brussels at email@example.com