Ineos Group Holdings Ltd. and Solvay SA, Europe’s two biggest makers of polyvinyl chloride, won European Union approval for a 4.3 billion-euro ($6 billion) joint venture of their PVC units after agreeing to sell plants.
Ineos will seek a buyer for sites producing suspension polyvinyl chloride and related assets, giving the purchaser a “self-standing S-PVC business capable of competing with the new joint venture,” the European Commission said in an e-mailed statement today. Ineos and Solvay won’t close their deal until they have a binding agreement with a purchaser approved by EU regulators, the commission said.
The venture, announced last year, would allow the companies 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 industry to explore deals. Solvay has said it plans to exit the PVC venture at a later stage.
“PVC is an important raw material used in the construction sector and in many other industries,” said EU Competition Commissioner Joaquin Almunia in an e-mailed statement. “The proposed commitments will ensure that the transaction will not result in higher prices to the detriment of businesses and consumers in Europe.”
Ineos and Solvay will continue to run their businesses separately until the transaction is completed which they expect in the fourth quarter of this year, they said in an e-mailed statement.
The divestments will remove overlaps between Ineos and Solvay for S-PVC sales in northwest Europe and for the bleach market in Belgium, the Netherlands and Luxembourg, the EU said. Ineos will sell its S-PVC plants in Wilhelmshaven in Germany, Mazingarbe in France and Beek in the Netherlands with upstream chlorine and ethylenedichloride production facilities in Tessenderlo in Belgium and Runcorn in the U.K.
The EU also ordered the companies to set up a joint venture with the buyer of the S-PVC business to produce chlorine at Runcorn.
Regulators said they were initially concerned that prices would increase as a result of the deal, citing weak competition among rivals of the new joint venture. Other companies wouldn’t have the capacity or incentives to expand production to combat any price increase by Ineos and Solvay, they said. Customers would have suffered from reduced supplies of bleach and S-PVC, which is used to produce pipes or window frames.