By Bernie Cahiles-Magkilat
Initial findings of the merger review of the acquisition by San Miguel Corp. (SMC) of cement firm Holcim Philippines showed the takeover may affect competition in Luzon areas as well as some parts in Northern and Southern Mindanao regions.
Following these findings, the Philippine Competition Commission (PCC) has launched a Phase 2 Review of the acquisition and called for a deeper probe if the transaction will substantially lessen competition in the grey cement, clinker, ready-mix-concrete, and aggregates markets.
“Initial findings of the merger review showed that the takeover may affect market concentration for the identified relevant product markets in Northeast Luzon, Northwest Luzon, Central Luzon, Southern Luzon, Northern Mindanao and Southern Mindanao,” according to a PCC statement.
The Phase 2 review will also assess whether there will be an increased likelihood of cartel-like coordination among cement firms operating in the identified geographic areas.
The PCC announced this after the initial 30-day Phase 1 review ended on August 22. PCC will have 60 days to complete the Phase 2 review.
PCC Chairman Arsenio Balisacan said the commencement of Phase 2 review signifies they were not satisfied with the previous review and that they need new information. This also signified a more detailed analysis of the transaction using additional information from the parties and stakeholders.
The second-level inquiry is set to determine if the merger of two of the biggest cement manufacturers in the country — SMC’s cement-manufacturing subsidiaries and Holcim—will likely lead to a substantial lessening of competition in the relevant markets.
The PCC noted that cement is a commodity with low product differentiation where brands undergo the same quality standards. While the transaction is national in scope, the initial review shows that geographic markets by region affect retailers and consumers differently in terms of production, distribution and price.
The acquiring entity, First Stronghold Cement Industries, Inc., is a wholly-owned subsidiary of San Miguel Equity Investments, Inc., which in turn is a wholly-owned subsidiary of San Miguel Corporation (SMC).
Through its subsidiaries, SMC is engaged in the manufacture and distribution of cement in the Philippines. It has ownership stake in Northern Cement Corporation and has joint venture interest with Northern Cement and subsidiary Oro Cemento in 2 upcoming plants. SMC’s President and Chief Operating Officer is the majority owner and chairman of Eagle Cement.