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Blackstone, Celanese Ditch Cigarette Deal on EU Opposition

Updated on
  • EU regulators demanded ‘excessive’ divestments, Celanese says
  • Deal would have combined No. 2 and 3 suppliers of acetate tow

Blackstone Group LP and Celanese Corp. ditched a bid to create a joint venture supplying materials for cigarette filters after European Union regulators demanded “excessive” divestments to allay antitrust concerns.

“Demands by the European Commission eliminated the advantages at the heart of the transaction,” Celanese Chief Executive Officer Mark Rohr said in a statement. “We worked hard and offered serious remedies to the European Commission and believed we had solved all competition issues.”

Celanese’s decision to withdraw from the EU’s merger review avoids a formal veto of the deal. The EU’s powerful antitrust arm is a tough hurdle for large deals, with two transactions vetoed last year and nine others withdrawn. Companies often offer hefty concessions to win approval. DuPont Co. sacrificed large parts of its pesticide business to win clearance to merge with Dow Chemical Co. last year.

The EU said the transaction “raised serious competition concerns that would significantly reduce rivalry” in the worldwide market, excluding China, where supplies for acetate tow -- used for cigarette filters -- are already concentrated in few hands, it said in an emailed statement. “It is the responsibility of the parties to propose remedies that address these concerns in full.”

The Blackstone-Celanese deal would have combined the world’s second- and third-largest manufacturers, excluding China, of acetate tow, a derivative of wood pulp used in making cigarette filters and other products. The EU flagged concerns last year that the transaction would leave the new entity’s two only other major competitors -- Eastman Chemical Co. and Daicel Corp. -- unable to exert sufficient competitive pressure.

The companies agreed in June to form a joint venture to combine Celanese’s Cellulose Derivatives and Blackstone’s Rhodia Acetow units. Financial terms weren’t disclosed. The deal is an effort to counter declining cigarette sales, particularly in China. Blackstone previously agreed to buy Solvay SA’s Acetow subsidiary for about 1 billion euros ($1.2 billion).

“The purpose of EU merger control is to prevent company tie-ups from restricting competition and leading to higher prices, reduced innovation or reduced choice for customers,” the regulators said.

(Updates with EU comment from fourth paragraph.)
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