PCC blocks URC sugar mill buyout deal
MANILA, Philippines–The country’s antitrust body has blocked Universal Robina Corp.’s (URC) buyout of its only rival in sugarcane milling services in Southern Luzon, saying the deal would have made it a monopoly at the expense of sugar planters.
The Philippine Competition Commission (PCC) has blocked the Gokongwei-led company from acquiring the only other sugar milling firm in Batangas.
The deal involves URC’s proposed acquisition of Central Azucarera Don Pedro, Inc. (CADPI), a subsidiary of the country’s largest integrated sugar business and the biggest ethanol producer — Roxas Holdings, Inc.
The decision was issued on Tuesday, after months of scrutiny and discussion that began as early as July last year.
“The prohibition prevents this deal from creating a monopoly in the relevant market that could harm the welfare of the sugar cane planters,” said PCC Chairman Arsenio Balisacan in a statement on Thursday.
Under the competition law, mergers and acquisitions deemed large enough to be potentially anti-competitive are subjected to a PCC review.
Eventually, these deals could be approved, blocked, or approved with certain conditions.
In this case, PCC began reviewing the deal in July, but flagged it for anti-competitive concerns in October. The parties then offered so-called voluntary commitments, but these were not enough to address the red flags of the deal.
“A merger-to-monopoly deal is among the most detrimental types of business transactions. The URC takeover removes its only competitor, erodes the benefits of competition for the sugarcane planters, and leaves market power at the hands of a single provider in an area,” Balisacan said.
URC wanted to acquire the milling and refining assets of CADPI, as well as the land on which the milling and refining assets are situated, according to a previous PCC statement.
This, however, would have come at the expense of sugarcane farmers, according to PCC’s earlier market investigation.
PCC said the deal would have created market power for URC, allowing it to “unilaterally reduce the planters’ share in the planter-miller sharing agreement, the theoretical recovery rates quoted to planters, and the incentives provided to planters.”
Furthermore, the resulting market power couldn’t be easily constrained. PCC said the sugar mills outside of Batangas — such as in Pampanga and Tarlac — are “too far.”
Also, barriers to entry for new players are high. Even in the remote possibility that a new player enters, this still won’t be immediately enough to keep URC from exercising its market power after the deal, PCC said.
While the transaction mainly affects sugarcane farmers in Southern Luzon, PCC said the sugar processed from these facilities serve nationwide demand, including that of Metro Manila.
PCC also said that the monopoly will “substantially lessen competition” not only in Batangas, but in Cavite, Laguna, and Quezon, too.
The parties involved have not yet issued a statement as of press time. How the block plays our in their respective business plans also remains to be seen. /jpv
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